FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This First Amended and Restated Loan and Security Agreement is
made as of November 30, 1999 by and among GMAC COMMERCIAL CREDIT LLC (successor
in interest to BNY Financial Corporation) ("Lender" or "GMAC"), having offices
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and GREKA INTEGRATED,
INC. ("Greka"), SABA REALTY, INC. ("Saba"), and SANTA ▇▇▇▇▇ REFINING COMPANY
("Santa ▇▇▇▇▇") (each of Greka, Saba and Santa ▇▇▇▇▇ is individually and
collectively hereinafter referred to as the "Borrower"), having their principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The
liability of Greka, Saba, and Santa ▇▇▇▇▇ hereunder shall be joint and several.
WHEREAS, on April 30, 1999, Borrower and the Lender entered into a
certain Loan and Security Agreement ("Original Loan Agreement") whereby Lender
provided to Borrower, inter alia, (i) a term loan in the original principal
amount of $6,000,000 ("Original Term Loan") and (ii) a revolving credit facility
in the original principal amount of up to $5,000,000 (and increased up to
$6,000,000 as of September 24, 1999) ("Original Revolving Credit"); and
WHEREAS, Borrower has requested and Lender is willing to amend and
restate the Original Loan Agreement to provide, inter alia, for (i) an increase
in the original principal amount of the Original Term Loan to $25,000,000, (ii)
an increase in the maximum amount of the Original Revolving Credit to
$10,000,000 and (iii) modifications to certain other terms and provisions of the
Original Agreement; and
WHEREAS, Borrower and Lender are willing to enter into this Agreement
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings and the terms and conditions contained herein, the parties hereto
agree as follows:
1. (A) General Definitions. When used in this Agreement, the
following terms shall have the following meanings:
"Advance Rates" means the Inventory Advance Rate and the
Receivables Advance Rate.
"Affiliate" of any Person means (a) any Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any Person described
in clause (a) above. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (i) to vote 5% or more of the securities
having ordinary voting power for the election of directors of such Person, or
(ii) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"Agent" has the meaning specified in Section 25 herein.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate in effect on such day and (ii) the
Federal Funds Rate in effect on such day plus 1/2 of 1% per annum.
"Ancillary Agreements" means all agreements, instruments, and
documents including, without limitation, mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
whether heretofore, concurrently, or hereafter executed by or on behalf of
Borrower or delivered to Lender, relating to this Agreement or to the
transactions contemplated by this Agreement.
"Bank" means The Bank of New York.
"Borrowing Base Certificate" shall have the meaning set forth
in Section 9.
"Business Day" means any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"Change of Ownership" means (a) any transfer (whether in one
or more transactions) of ownership of not less than 50% of the common stock of
Borrower held by the Original Owners (including for the purposes of the
calculation of percentage ownership, any shares of common stock into which any
capital stock of Borrower held by any of the Original Owners is convertible or
for which any such shares of the capital stock of Borrower or of any other
Person may be exchanged and any shares of common stock issuable to such Original
Owners upon exercise of any warrants, options or similar rights which may at the
time of calculation be held by such Original Owners) to a Person who is neither
an Original Owner nor an Affiliate of an Original Owner or (b) any merger,
consolidation or sale of substantially all of the property or assets of
Borrower.
"Closing Date" means November 30, 1999 or such other date as
may be agreed upon by the parties hereto.
"Collateral" means and includes:
I. With respect to Santa ▇▇▇▇▇:
(A) all of its Inventory;
(B) all of its Equipment;
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(C) all of its General Intangibles;
(D) all of its Receivables;
(E) All of its Investment Property;
(F) all of its books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related data processing
software (owned by it or in which it has an interest) which at any time evidence
or contain information relating to (A), (B), (C), (D) and (E) above or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(G) all of its documents of title, policies and
certificates of insurance, securities, chattel paper, other documents or
instruments evidencing or pertaining to (A), (B), (C), (D), (E) and (F) above;
(H) all of its guaranties, liens on real or personal
property, leases, and other agreements and property which in any way secure or
relate to (A), (B), (C), (D), (E), (F) and (G) above, or are acquired for the
purpose of securing and enforcing any item thereof;
(I) (i) all of its cash held as cash collateral to
the extent not otherwise constituting Collateral, all other cash or property at
any time on deposit with or held by Lender for the account of Santa ▇▇▇▇▇
(whether for safekeeping, custody, pledge, transmission or otherwise), (ii) all
of its present or future deposit accounts (whether time or demand or interest or
non-interest bearing) of Santa ▇▇▇▇▇ with Lender or any other Person including
those to which any such cash may at any time and from time to time be credited,
(iii) all of its investments and reinvestments (however evidenced) of amounts
from time to time credited to such accounts, and (iv) all interest, dividends,
distributions and other proceeds payable on or with respect to (x) such
investments and reinvestments and (y) such accounts;
(J) All of its oil and natural gas or other reserves
and oil and gas rights located on or under or in any manner related to the
premises described in Schedule 1(A)(1) attached hereto (the "Santa ▇▇▇▇▇ Oil and
Gas Properties") and if purchased by Borrower, the Vintage Oil and Gas
Properties; and
(K) all products and proceeds of (A), (B), (C), (D),
(E), (F), (G), (H), (I) and and (J) above (including, but not limited to, all
claims to items referred to in (A), (B), (C), (D), (E), (F), (G), (H), (I) and
(J) above) and all claims of Santa ▇▇▇▇▇ against third parties for (x) (i) loss
of, damage to, or destruction of, and (ii) payments due or to become due under
leases, rentals and hires of, any or all of (A), (B), (C), (D), (E), (F), (G),
(H), (I) and (J) above and (y) proceeds payable under, or unearned premiums with
respect to, policies of insurance in whatever form;
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II. With respect to Greka: (A) All of the issued and outstanding
capital stock of Saba, and Santa ▇▇▇▇▇ owned by Greka as more particularly
described on Schedule 1(A)(2) annexed hereto (the "Shares") and all proceeds and
products thereof, which shall include, without limitation, all dividends and
distributions thereon, whether in cash, securities or kind, all securities,
Investment Property and /or assets of any type to which the holder of any of
such Shares may now or hereafter be entitled as a result of splits, reverse
splits, mergers, consolidations, recapitalization and/or reorganizations
affecting any of the Shares and/or resulting from liquidations and /or
dissolutions, split-ups, spin-offs, reclassifications or the like affecting any
of the Shares;
III. With respect to Saba: (A) all fixtures, equipment, buildings,
structures, improvements, building materials, machinery, machines, tools, parts,
pumps, engines, motors, boilers, incinerators located at or used in connection
with or affixed to the real property more particularly described on Schedule
1(A)(3) annexed hereto and all substitution, accessories, accessions,
replacements, improvements and additions to any or all of the foregoing and all
of the collateral described in subsections (F), (G), (H) and (K) of II above
owned by Saba relating to any of the foregoing;
IV. Real Property: In addition to the foregoing, the real property
owned by Santa ▇▇▇▇▇ and/or Saba more particularly described on Schedule 1(A)(3)
attached hereto shall be deemed to be part of the Collateral and subject to all
of the provisions of this Agreement relating to the Collateral.
"Co-Lender" means any party who may now or hereafter become a
Co-Lender hereunder pursuant to Section 25 hereof.
"Commitment(s)" shall mean the respective maximum principal
dollar amount of Loans which each Co-Lender is obligated to extend to the
Borrower, as more fully set forth on the signature page(s) hereto, expressed
both as a dollar amount and as a percentage of the total Commitments.
"Conoco Indemnity Agreement" shall mean the environmental
indemnification contained in the Purchase and Exchange Agreement dated April 13,
1994 by and among ▇▇▇▇▇▇▇ Oil Company of California, Conoco, Inc. and Borrower.
"Contract Rate" means an interest rate per annum equal to (i)
Alternate Base Rate plus (ii) one percent (1%); provided, however, the Contract
Rate shall not at any time be less than six percent (6%). Notwithstanding the
foregoing, provided no Event of Default shall have occurred hereunder, the
Contract Rate shall be reduced to an interest rate per annum equal to (i) the
Alternate Base Rate plus three quarters of one percent (.75%) as of December 31,
2000 and (ii) the Alternate Base Rate plus one-half of one percent (.50%) as of
December 31, 2001, further provided, however, that upon the occurrence of an
Event of Default should there have been any reduction of the Contract Rate, then
in such event the Contract Rate shall revert to the Alternate Base Rate plus one
percent (1%).
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"Credit Risk" means the risk of loss resulting solely and
exclusively from a Customer's financial inability to pay at maturity with
respect to any Receivable purchased hereunder.
"Current Assets" at a particular date, means all cash, cash
equivalents, accounts and inventory of Borrower and all other items which would,
in conformity with GAAP, be included under current assets on a balance sheet of
Borrower as at such date; provided, however, that such amounts shall not include
(a) any amounts for any indebtedness owing by an Affiliate of Borrower, unless
such indebtedness arose in connection with the sale of goods or other property
in the ordinary course of business and would otherwise constitute current assets
in conformity with GAAP, (b) any shares of stock issued by an Affiliate of
Borrower, (c) the cash surrender value of any life insurance policy, (d) any
assets which would be classified as intangible assets under GAAP, or (e) any
prepaid expenses.
"Current Liabilities" at a particular date, means all amounts
which would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower as at such date, but in any event including, without
limitation, the amounts of (a) all indebtedness payable on demand, or, at the
option of the Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any indebtedness
(whether installment, serial maturity, sinking fund payment or otherwise)
required to be made not more than twelve (12) months after such date, (c) all
reserves in respect of liabilities or indebtedness payable on demand or, at the
option of the Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, the validity of which is contested at such date,
and (d) all accruals for federal or other taxes measured by income payable
within a twelve (12) month period.
"Customer" means and includes the account debtor with respect
to any Receivable, the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.
"Default Rate" means a rate equal to two percent (2%) per
annum in excess of the Contract Rate or the Overadvance Rate, as the case may
be.
"Dispute" means any cause asserted for nonpayment of
Receivables, including, without limitation, any alleged defense, counterclaim,
offset, dispute or other claim (real or merely asserted) whether arising from or
relating to the sale of goods or rendition of services or arising from or
relating to any other transaction or occurrence.
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"Eligible Inventory" means and includes finished goods
Inventory of Santa ▇▇▇▇▇ which Lender, in its sole and absolute discretion,
determines: (a) is subject to the security interest of Lender and is subject to
no other liens or encumbrances whatsoever (other than Permitted Liens); (b) is
in good condition and meets all standards imposed by any governmental agency, or
department or division thereof having regulatory authority over such Inventory,
its use or sale including but not limited to the Federal Fair Labor Standards
Act of 1938 as amended, and all rules, regulations and orders thereunder; (c) is
currently either usable or salable in the normal course of business at prices
not less than cost; (d) is located at Santa Maria's premises in the United
States ; and (e) is otherwise acceptable to Lender as determined in good faith
by Lender in the reasonable exercise of its discretion.
"Eligible Receivables" means and includes each Receivable
which conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) no return, rejection or
repossession of the merchandise has occurred; (c) merchandise or services shall
not have been rejected or disputed by the Customer and there shall not have been
asserted any offset, defense, counterclaim, or Dispute; (d) continues to be in
full conformity with the representations and warranties made by Santa ▇▇▇▇▇ to
Lender with respect thereto; (e) Lender is, and continues to be, satisfied with
the credit standing of the Customer in relation to the amount of credit
extended; (f) is documented by an invoice in a form approved by Lender and shall
not be unpaid (i) more than 120 days from invoice date; or (ii) more than 60
days past due date; (g) less than fifty percent (50%) of the aggregate unpaid
amount of invoices due from such Customer remain unpaid more than sixty (60)
days from due date; (h) is not evidenced by chattel paper or an instrument of
any kind with respect to or in payment of the Receivable unless such instrument
is duly endorsed to and in possession of Lender or represents a check in payment
of a Receivable; (i) the Customer is not located outside of the United States;
(j) is not subject to any lien, other than Permitted Liens; (k) does not arise
out of transactions with any employee, officer, agent, director, stockholder or
Affiliate of Santa ▇▇▇▇▇; (l) is payable to Santa ▇▇▇▇▇; (m) does not arise out
of a ▇▇▇▇ and hold sale prior to shipment and, if the Receivable arises out of a
sale to any Person to which Santa ▇▇▇▇▇ is indebted, the amount of such
indebtedness, and any anticipated indebtedness, is deducted in determining the
face amount of such Receivable; (n) is net of any returns, discounts, claims,
credits and allowances; (o) if the Receivable arises out of contracts between
Santa ▇▇▇▇▇ and the United States, any state, or any department, agency or
instrumentality of any of them, Santa ▇▇▇▇▇ has so notified Lender, in writing,
prior to the creation of such Receivable, and, if Lender so requests, there has
been compliance with any governmental notice or approval requirements,
including, without limitation, compliance with the Federal Assignment of Claims
Act; (p) is a good and valid account representing an undisputed bona fide
indebtedness incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto with respect to an unconditional sale and
delivery upon the stated terms of goods sold by Santa ▇▇▇▇▇, or work, labor
and/or services rendered by Santa ▇▇▇▇▇; and (q) is otherwise satisfactory to
Lender as determined in good faith by Lender in the reasonable exercise of its
discretion.
"Equipment" means and includes all now owned or hereafter
acquired equipment, machinery and goods (excluding Inventory), whether or not
constituting fixtures, including, without limitation, plant and office
equipment, tools, dies, parts, data processing equipment, furniture and trade
fixtures, trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefor and all accessions thereto.
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"Event of Default" means the occurrence of any of the events
set forth in Section 18.
"Federal Funds Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such transactions
received by The Bank of New York from three Federal funds brokers of recognized
standing selected by The Bank of New York.
"First Term Loan Advance" shall have the meaning set forth in
Section 2(k)(1).
"Formula Amount" shall have the meaning set forth in Section
2(d).
"GAAP" means generally accepted accounting principles,
practices and procedures in effect from time to time.
"General Intangibles" means and includes all now owned or
hereafter acquired general intangibles as said term is defined in the Uniform
Commercial Code in effect in the State of New York including, without
limitation, trademarks, trade names, trade styles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, chooses in action, causes of action, corporate or other
business records, inventions, designs, goodwill, claims under guarantees,
licenses, franchises, tax refunds, tax refund claims, computer programs,
computer data bases, computer program flow diagrams, source codes, object codes
and all other intangible property of every kind and nature.
"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated byphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
environmental law and in the regulations adopted pursuant thereto.
"Incipient Event of Default" means any act or event which,
with the giving of notice or passage of time or both, would constitute an Event
of Default.
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"Initial Santa ▇▇▇▇▇ Oil and Gas Properties" means the Santa
▇▇▇▇▇ Oil and Gas Properties which are described on Schedule 1(A)(1) attached
hereto.
"Inventory" means and includes all of Santa Maria's now owned
or hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Santa Maria's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in
the definition of Inventory Availability.
"Inventory Availability" means the amount of Revolving Credit
Advances against Eligible Inventory of Santa ▇▇▇▇▇ Lender may from time to time
during the Term make available to Borrower up to 65% ("Inventory Advance Rate")
of the value of Eligible Inventory (calculated on the basis of the lower of cost
or market, on a first-in first-out basis).
"Investment Property" shall have the meaning now or hereafter
ascribed to such term in the New York Uniform Commercial Code, as amended.
"Loans" means the Revolving Credit Advances, the Term Loan and
all other extensions of credit hereunder.
"Majority Lenders" means at any time the Co-Lenders (which may
be the Agent) holding at least fifty-one (51%) percent of the then aggregate
unpaid principal amount of the Loans, or if no such principal amount is then
outstanding, at least fifty one percent (51%) of the aggregate Commitments.
"Matured Funds Rate" means the rate of interest, announced by
Lender from time to time, as the rate applicable to matured funds, such rate to
be adjusted automatically on the effective date of any change in such rate as
announced by Lender.
"Maximum Loan Amount" means $35,000,000.
"Maximum Revolving Amount" means $10,000,000.
"Net Face Amount" of Receivables means the gross face invoice
amount thereof, less returns, discounts (the calculation of which shall be
determined by Lender where optional terms are given), anticipation or any other
unilateral deductions taken by Customers, and credits and allowances to
Customers of any nature.
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"Obligations" means and includes all Loans, all advances,
debts, liabilities, obligations, covenants and duties owing by Borrower to
Lender (or any corporation that directly or indirectly controls or is controlled
by or is under common control with Lender) of every kind and description
(whether or not evidenced by any note or other instrument and whether or not for
the payment of money or the performance or non-performance of any act), direct
or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, whether existing by operation of law or
otherwise now existing or hereafter arising including, without limitation, any
debt, liability or obligation owing from Borrower to others which Lender may
have obtained by assignment or otherwise and further including, without
limitation, all interest, charges or any other payments Borrower is required to
make by law or otherwise arising under or as a result of this Agreement and the
Ancillary Agreements, together with all reasonable expenses and reasonable
attorneys' fees chargeable to Borrower's account or incurred by Lender in
connection with Borrower's account whether provided for herein or in any
Ancillary Agreement.
"Oil and Gas Properties" means the Santa ▇▇▇▇▇ Oil and Gas
Properties and the Vintage Oil and Gas Properties.
"Original Owners" means Greka Energy Corporation with respect
to Greka and Greka with respect to Santa ▇▇▇▇▇ and Saba.
"Overadvance Rate" means a rate equal to one percent (1%) per
annum in excess of the Contract Rate.
"Permitted Liens" means (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business securing
sums not overdue; (ii) liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Borrower in
conformity with GAAP, (iii) liens in favor of Lender, (iv) liens for taxes (a)
not yet due or (b) being diligently contested in good faith, provided that
adequate reserves with respect thereto are maintained on the books of Borrower
in conformity with GAAP, and (v) liens specified on Schedule 1(A)(4) hereto.
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prime Rate" means the prime commercial lending rate of The
Bank of New York as publicly announced in New York, New York to be in effect
from time to time, such rate to be adjusted automatically, without notice, on
the effective date of any change in such rate. This rate of interest is
determined from time to time and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged to any particular class or category of customers.
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"Receivables" means and includes all of Santa Maria's now
owned or hereafter acquired accounts and contract rights, instruments, insurance
proceeds, documents, chattel paper, letters of credit and Santa Maria's rights
to receive payment thereunder, any and all rights to the payment or receipt of
money or other forms of consideration of any kind at any time now or hereafter
owing or to be owing to Santa ▇▇▇▇▇, all proceeds thereof and all files in which
Santa ▇▇▇▇▇ has any interest whatsoever containing information identifying or
pertaining to any of Santa Maria's Receivables, together with all of Santa
Maria's rights to any merchandise which is represented thereby, and all Santa
Maria's rights, title, security and guaranties with respect to each Receivable,
including, without limitation, all rights of stoppage in transit, replevin and
reclamation and all rights as an unpaid vendor.
"Receivables Advance Rate" shall have the meaning set forth in
the definition of Receivables Availability.
"Receivables Availability" means the amount of Revolving
Credit Advances against Eligible Receivables Lender may from time to time during
the term of this Agreement make available to Borrower up to 85% ("Receivables
Advance Rate") of the net face amount of Eligible Receivables.
"Reports" shall have the meaning set forth in Section 14.
"Retained Goods" shall have the meaning set forth in Section
8(h).
"Revolving Credit Advances" shall have the meaning set forth
in Section 2(d).
"Santa ▇▇▇▇▇ Oil and Gas Properties" shall have the meaning
set forth in Section 1.1, definition of "Collateral",
Subsection I.(J).
"Sanction/Embargo Programs" shall mean economic and other
sanctions and embargo program restrictions promulgated by the government of the
United States of America or any office or agency thereof including but not
limited to the President and the Office of Foreign Assets Control of the
Treasury Department, or either of them.
"Second Term Loan Advance" shall have the meaning set forth in
Section 2(k)(2).
"Secondary Santa ▇▇▇▇▇ Oil and Gas Properties" means the Santa
▇▇▇▇▇ Oil and Gas Properties which are described on Schedule 1(A)(1) attached
hereto.
"Settlement Date" means two (2) Business Days after the day on
which the applicable Receivable is actually collected by Lender.
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"Subordinated Debt" means any debt subordinated to Lender upon
terms and conditions satisfactory to Lender in its sole discretion.
"Subsidiary" of any Person means a corporation or other entity
of whose shares of stock or other ownership interests having ordinary voting
power (other than stock or other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar functions for such
entity, are owned, directly or indirectly, by such Person.
"Tangible Net Worth" at a particular date means (a) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of the Borrower.
"Term" means the Closing Date through November 30, 2003,
subject to acceleration upon the occurrence of an Event of Default or other
termination hereunder.
"Term Loan" shall have the meaning set forth in paragraph
2(k).
"Term Loan Note" shall have the meaning set forth in paragraph
2(l).
"Third Term Loan Advance" shall have the meaning set forth in
Section 2(k)(3).
"Total Liabilities" at a particular date means all
Indebtedness of Borrower as at such date.
"Vintage Oil and Gas Properties" means the oil and gas
reserves and oil and gas rights which may be acquired by Santa ▇▇▇▇▇ located on
or under or in any manner related to the real property more particularly
described in Schedule 1(A)(5) attached hereto.
"Working Capital" at a particular date means the excess, if
any, of Current Assets over Current Liabilities at such date.
"Year 2000 Issue" means the inability of computer software,
hardware and firmware systems and/or equipment containing embedded computer
chips owned or operated by a Person or used or relied upon in the conduct of a
Person's business (including systems and equipment supplied by others or with
which such person's computer systems interface) to properly receive, transmit,
process, manipulate, store, retrieve, re-transmit, without errors or delays, or
in any other way to accurately recognize or otherwise utilize data and
information in all respects in relation to the year 2000 or the inclusion of
dates on or after January 1, 2000.
(B) Accounting Terms. Any accounting terms used in
this Agreement which are not specifically defined shall have the meanings
customarily given them in accordance with GAAP.
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(C) Other Terms. All other terms used in this
Agreement and defined in the Uniform Commercial Code as adopted in the State of
New York, shall have the meaning given therein unless otherwise defined herein.
2. Sale of Receivables; Purchase Price; Accounts Receivables
Management; Loans.
(a) Santa ▇▇▇▇▇ hereby assigns and sells to Lender,
as absolute owner, and Lender hereby purchases from Santa ▇▇▇▇▇ all Receivables
created on and after the date hereof, which arise from Santa Maria's sale of
merchandise or rendition of services.
(b) Lender shall not assume the Credit Risk on any
Receivables. Accordingly, all Receivables shall be purchased by Lender with full
recourse to Santa ▇▇▇▇▇ in the event of non-payment thereof for any reason
whatsoever and Lender may charge back to Borrower's account the amount of any
Receivable that is not paid on its due date. The procedure manual Lender has
delivered to Borrower describes Lender's current practices and procedures
regarding its accounts receivable management and record keeping services. Lender
reserves the right to vary such practices and procedures from time to time in
its sole discretion. Lender shall have no liability to Borrower for any alleged
failure on Lender's part to provide adequate accounts receivable management and
record keeping services by including, without limitation, any liability of any
kind whatsoever for consequential or other damages or penalties based upon any
such alleged failure on Lender's part.
(c) The purchase price of Receivables shall be the
Net Face Amount thereof. The purchase price will be credited to Borrower's
account and remitted to Borrower on the Settlement Date. Lender may deduct from
the amount payable to Borrower on any Settlement Date reserves for all
Obligations then chargeable to Borrower's account and Obligations which in
Lender's sole judgment may be chargeable to Borrower's account thereafter.
(d) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Lender may, in its sole discretion, make
revolving credit advances (the "Revolving Credit Advances") to Borrower from
time to time during the Term which, in the aggregate at any time outstanding,
will not exceed the lesser of (x) the Maximum Revolving Amount or (y) an amount
equal to the sum of:
(1) Receivables Availability, plus
(2) Inventory Availability, minus
(3) such reserves as Lender may in its sole
and absolute discretion deem proper and necessary from time to time.
-12-
The sum of 2(d)(1) plus (2) minus (3) shall be referred to as
the "Formula Amount". In this regard, Borrower agrees that it shall submit a
Borrowing Base Certificate to Lender, in form and substance and with such
frequency, as more fully described in Section 9 below, to include such
calculations, in each instance that Lender may deem necessary or desirable in
order to verify whether Borrower is in compliance with the preceding limitations
pertaining to Revolving Credit Advances.
(e) Notwithstanding the limitations set forth above,
Lender retains the right to lend Borrower from time to time such amounts in
excess of such limitations as Lender may determine in its sole discretion.
(f) Borrower acknowledges that the exercise of
Lender's discretionary rights hereunder may result during the term of this
Agreement in one or more increases or decreases in the Advance Rates and
Borrower hereby consents to any such increases or decreases which may limit or
restrict advances requested by Borrower.
(g) If Borrower does not pay any interest, fees,
costs, charges or commissions to Lender when due, Borrower shall thereby be
deemed to have requested, and Lender is hereby authorized at its discretion to
make and charge to Borrower's account, a Revolving Credit Advance to Borrower as
of such date in an amount equal to such unpaid interest, fees, costs, charges or
commissions.
(h) Any sums expended by Lender due to Borrower's
failure to perform or comply with its obligations under this Agreement,
including but not limited to the payment of taxes, insurance premiums or
leasehold obligations, shall be charged to Borrower's account as a Revolving
Credit Advance and added to the Obligations.
(i) Lender will account to Borrower monthly with a
statement of all Loans and other advances, charges and payments made pursuant to
this Agreement, and such account rendered by Lender shall be deemed final,
binding and conclusive unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days of the date each account was rendered and
received (receipt presumed seven (7) days after mailing) specifying the item or
items to which objection is made.
(j) During the Term, Borrower may borrow, prepay and
reborrow Revolving Credit Advances, all in accordance with the terms and
conditions hereof.
(k) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Lender will make a term loan to Borrower
in the sum of $25,000,000 ("Term Loan") which shall be advanced as follows:
1. An advance in the amount of
$16,500,000 ("First Term Loan
Advance") shall be made under the
Term Loan on the Closing Date, upon
satisfaction of all of the terms and
conditions contained herein and in
the Ancillary Documents.
-13-
2. At any time following the date
hereof through and including March
31, 2000, Borrower may request an
advance in the amount of up to
$1,000,000 solely for the purchase
of the Secondary Santa ▇▇▇▇▇ Oil and
Gas Properties ("Second Term Loan
Advance"). Lender's obligation to
make the Second Term Loan Advance
shall be subject to the satisfaction
of all of the following conditions
precedent:
(A) Borrower shall have
provided to Lender such
approvals, environmental
audits (but only upon the
occurrence of a Hazardous
Discharge or Environmental
Complaint which occurs
following the date hereof),
consents or documents as
Lender may reasonably
request; and
(B) Borrower shall have
provided to lender an
opinion of counsel from
Jeffers, Mangels, ▇▇▇▇▇▇ &
Marmaro LLP, or such other
law firm as is reasonably
acceptable to Lender, in
substantially the form
delivered to Lender as of
the date hereof with regard
to the Initial Santa ▇▇▇▇▇
Oil and Gas Properties.
(C) Borrower shall have
submitted to Lender a copy
of all acquisition
documents relating to the
purchase of the Secondary
Santa ▇▇▇▇▇ Oil and Gas
Properties in substantially
the form delivered to
Lender with respect to the
Initial Santa ▇▇▇▇▇ Oil and
Gas Properties; and
(D) Borrower shall have
executed and delivered to
Lender such documents and
instruments as Lender deems
necessary to grant, assign,
convey and/or pledge to
Lender a first priority
security interest in the
assets to be purchased with
the Second Term Loan
Advance free and clear of
all liens and encumbrances
of any kind which are not
consented to by the Lender
and Borrower shall have
provided to Lender an
Attorney's Certificate of
Title issued by a law firm
acceptable to Lender
opining (i) to the first
priority of Lender's
security interests therein,
and (ii) that Lender's
interests are subject to no
liens, claims,
encumbrances, or
restrictions of any kind
unless consented to by
Lender; and
-14-
(E) all representations and
warranties contained herein
shall be true and correct
on and as of the date of
such request as though made
on and as of such date; and
(F) no Incipient Event of
Default or Event of Default
shall have occurred and/or
be continuing.
(G) Borrower must have
submitted to Lender the
completed Form of Request
for Term Loan Advance
attached hereto as Schedule
2(k).
3. At any time following the
date hereof through and
including March 31, 2000,
Borrower may request an
advance in the amount of up
to $7,500,000.00 solely for
the purchase of the Vintage
Oil and Gas Properties
("Third Term Loan
Advance"). Lender's
obligation to make the
Third Term Loan Advance
shall be subject to the
satisfaction of all of the
following conditions
precedent:
(A) Borrower shall have
provided to Lender such
approvals, environmental
audits, consents or
documents as Lender may
reasonably request; and
(B) Borrower shall have
provided to lender an
opinion of counsel from
Jeffers, Mangels, ▇▇▇▇▇▇ &
Marmaro LLP, or such other
law firm as is reasonably
acceptable to Lender, in
substantially the form
delivered to Lender as of
the date hereof with regard
to the Initial Santa ▇▇▇▇▇
Oil and Gas Properties.
(C) Borrower shall have
submitted to Lender a copy
of all acquisition
documents relating to the
purchase of the Vintage Oil
and Gas Properties, the
terms and conditions of
which acquisition documents
must be satisfactory to
Lender in its sole and
absolute discretion with
respect to the payment
terms and with respect to
title to the Vintage Oil
and Gas Properties and
reasonably satisfactory to
Lender in all other
respects; and
-15-
(D) Borrower shall have
executed and delivered to
Lender such documents and
instruments as Lender deems
necessary to grant, assign,
convey and/or pledge to
Lender a first priority
security interest in the
assets to be purchased with
the Third Term Loan Advance
free and clear of all liens
and encumbrances of any
kind which are not
consented to by the Lender
and Borrower shall have
provided to Lender an
Attorney's Certificate of
Title issued by a law firm
acceptable to Lender
opining (i) to the first
priority of Lender's
security interests therein,
and (ii) that Lender's
interests are subject to no
liens, claims,
encumbrances, or
restrictions of any kind
unless consented to by
Lender; and
(E) Borrower shall have
provided to Lender evidence
receipt of additional
funds, from sources
acceptable to Lender in its
sole and absolute
discretion, necessary to
complete the acquisition of
the Vintage Oil and Gas
Properties together with
fully-executed
subordination agreements in
form and substance
acceptable to Lender with
respect to any funds loaned
to Borrower in connection
with such acquisition; and
(F) all representations and
warranties contained herein
shall be true and correct
on and as of the date of
such request as though made
on and as of such date; and
(G) no Incipient Event of
Default or Event of Default
shall have occurred and/or
be continuing.
(H) Borrower must have
submitted to Lender the
completed Form of Request
for Term Loan Advance
attached hereto as Schedule
2(k).
-16-
(l) Principal payments under the Term Loan shall be
fixed as of and shall be based upon the outstanding principal balance hereof as
of March 31, 2000 (the "March 2000 Principal"). The Term Loan shall be payable
in monthly payments of principal, each in the amount of 3.428568 percent of the
March 2000 Principal on the first day of each of the months of April, May, June,
July, August, September and October of each year commencing on April 1, 2000 and
continuing through and including October 1, 2002. Commencing on April 1, 2003
and on the same day of each of the months of May, June, July, August and
September of such year the note shall be payable in monthly payments of
principal, each in the amount of four (4.0%) percent of the March 2000
Principal. (For example, if the full face value hereof has been advanced as of
March 31, 2000, this Term Loan shall be payable in monthly payments of
principal, each in the amount of $857,142 on the first day of each of the months
of April, May, June, July, August, September and October of each year commencing
on April 1, 2000 and continuing through and including October 1, 2002.
Commencing on April 1, 2003 and on the same day of each of the months of May,
June, July, August and September of such year the Term Loan shall be payable in
monthly payments of principal, each in the amount of $1,000,000.) All remaining
principal and accrued interest outstanding under the Term Loan shall be due and
payable in full on October 1, 2003. The Term Loan shall be subject to
acceleration upon the occurrence of an Event of Default hereunder or termination
of this Agreement and shall otherwise be evidenced by and subject to the terms
and conditions set forth in a secured promissory note in substantially the form
of the note attached hereto as Schedule 2(l) ("Term Loan Note").
(m) The aggregate balance of Loans outstanding at any
time shall not exceed the Maximum Loan Amount. The aggregate balance of
Revolving Credit Advances outstanding at any time shall not exceed the Formula
Amount.
3. Repayment of Loans.
(a) Borrower shall be required to (i) make a
mandatory prepayment hereunder at any time that the aggregate outstanding
principal balance of the Revolving Credit Advances made by Lender to Borrower
hereunder is in excess of the Formula Amount in an amount equal to such excess,
and (ii) repay on the expiration of the Term (x) the then aggregate outstanding
principal balance of Revolving Credit Advances made by Lender to Greka hereunder
together with accrued and unpaid interest, fees, charges and commissions and (y)
all other amounts owed Lender under this Agreement and the Ancillary Agreements.
(b) The Term Loan shall be due and payable as
provided in paragraph 2(l) hereof and in the Term Loan Note.
4. Procedure for Revolving Credit Advances. Borrower
may by written notice request a borrowing of Revolving Credit Advances prior to
1:00 P.M. New York time on the Business Day of its request to incur, on that
day, a Revolving Credit Advance. All Revolving Credit Advances shall be
disbursed from whichever office or other place Lender may designate from time to
time and, together with any and all other Obligations of Borrower to Lender,
shall be charged to the Borrower's account on Lender's books. The proceeds of
each Revolving Credit Advance made by the Lender shall be made available to
Borrower on the day so requested by way of credit to the Borrower's operating
account maintained with Borrower such bank as Borrower designated to Lender. Any
and all Obligations due and owing hereunder may be charged to Borrower's account
and shall constitute Revolving Credit Advances.
-17-
5. Interest; Fees; Commissions.
(a) Interest.
(1) Except as modified by Section
5(a)(3) below, interest on Loans
shall be payable in arrears on the
first day of each month. Interest
payments hereunder may, at Lender's
option be charged by Lender to
Borrower's account. Interest charges
shall be computed on the unpaid
balance of the Loans for each day
they are outstanding at a rate per
annum equal to the Contract Rate. In
the event the aggregate amount of
Revolving Credit Advances exceeds
the Formula Amount for five (5) or
more days in any month during the
Term, the average daily balance of
Revolving Credit Advances in that
month shall bear interest at the
Overadvance Rate.
(2) Interest shall be computed on
the basis of actual days elapsed
over a 360-day year.
(3) Upon the occurrence and during
the continuance of an Event of
Default, interest shall be payable
at the Default Rate.
(4) Notwithstanding the foregoing,
in no event shall interest exceed
the maximum rate permitted under any
applicable law or regulation, and if
any provision of this Agreement or
an Ancillary Agreement is in
contravention of any such law or
regulation, such provision shall be
deemed amended to provide for
interest at said maximum rate and
any excess amount shall either be
applied, at Lender's option, to the
outstanding Loans in such order as
Lender shall determine or refunded
by Lender to Borrower.
(5) Borrower shall pay principal,
interest and all other amounts
payable hereunder, or under any
Ancillary Agreement, without any
deduction whatsoever, including, but
not limited to, any deduction for
any set-off or counterclaim.
-18-
(b) Fees.
(1) Closing Fee. Upon closing of
this Agreement by Borrower and
Lender, Borrower shall pay to Lender
a closing fee in an amount equal to
$500,000, payable $400,000 on the
Closing Date and $100,000 on the
date of funding of the Third Term
Loan Advance.
(2) Collateral Monitoring Fee.
Borrower shall pay to Lender a
monthly Collateral Monitoring Fee in
the amount of $5,000.00.
Additionally, upon Lender's
performance of any collateral
monitoring, including but not
limited to any field examination,
collateral analysis or other
business analysis, the need for
which is to be determined by Lender
and which monitoring is undertaken
by Lender or for Lender's benefit, a
per diem amount equal to Lender's
then standard rate per person, for
each person employed to perform such
monitoring, together with all out of
pocket costs, disbursements and
expenses incurred by the Lender and
the person performing such
collateral monitoring, shall be
charged to Borrower's account.
Additionally, in the event that
Lender shall for any reason
determine in the exercise of its
reasonable discretion that any of
the Collateral may be impaired or
suffer a decline in value,
diminution or waste, Lender may
cause to be conducted, at the sole
cost and expense of Borrower, but no
more than one (1) time per year in
between annual reserve reports
provided there is no Event of
Default, by Netherland ▇▇▇▇▇▇ and
Associates (or by appraisers
acceptable to Lender and Borrower in
all respects), roll forward reserve
reports" of the Oil and Gas
Properties owned by Borrower.
(c) Increased Costs. In the event that any
applicable law, treaty or governmental
regulation, or any change therein or in the
interpretation or application thereof, or
compliance by Lender (for purposes of this
Section 5(c), the term "Lender" shall
include Lender and any corporation or bank
controlling Lender) with any request or
directive (whether or not having the force
of law) from any central bank or other
financial, monetary or other authority,
shall:
(1) subject Lender to any tax of any
kind whatsoever with respect to this
Agreement or change the basis of
taxation of payments to Lender of
principal, fees, interest or any
other amount payable hereunder or
under any Ancillary Agreements
(except for changes in the rate of
tax on the overall net income of
Lender by the jurisdiction in which
it maintains its principal office);
-19-
(2) impose, modify or hold
applicable any reserve, special
deposit, assessment or similar
requirement against assets held by,
or deposits in or for the account
of, advances or loans by, or other
credit extended by, any office of
Lender, including without limitation
pursuant to Regulation D of the
Board of Governors of the Federal
Reserve System; or
(3) impose on Lender any other
condition with respect to this
Agreement or any Ancillary
Agreements; and the result of any of
the foregoing is to increase the
cost to Lender of making, renewing
or maintaining its Loans hereunder
by an amount that Lender deems to be
material or to reduce the amount of
any payment (whether of principal,
interest or otherwise) in respect of
any of the Loans by an amount that
Lender deems to be material, then,
in any case Borrower shall promptly
pay Lender, upon its demand, such
additional amount as will compensate
Lender for such additional cost or
such reduction, as the case may be.
Lender shall through an officer
certify the amount of such
additional cost or reduction to
Borrower, and such certification
shall be conclusive absent manifest
error.
(d) Capital Adequacy.
(1) In the event that Lender shall
have determined that any applicable
law, rule, regulation or guideline
regarding capital adequacy, or any
change therein, or any change in the
interpretation or administration
thereof by any governmental
authority, central bank or
comparable agency charged with the
interpretation or administration
thereof, or compliance by Lender
(for purposes of this Section 5(d),
the term "Lender" shall include
Lender and any corporation or bank
controlling Lender) with any request
or directive regarding capital
adequacy (whether or not having the
force of law) of any such authority,
central bank or comparable agency,
has or would have the effect of
reducing the rate of return on
Lender's capital as a consequence of
its obligations hereunder to a level
below that which Lender could have
achieved but for such adoption,
change or compliance (taking into
consideration Lender's policies with
respect to capital adequacy) by an
amount deemed by Lender to be
material, then, from time to time,
Borrower shall pay upon demand to
Lender such additional amount or
amounts as will compensate Lender
for such reduction. In determining
such amount or amounts, Lender may
use any reasonable averaging or
attribution methods. The protection
of this Section shall be available
to Lender regardless of any possible
contention of invalidity or
inapplicability with respect to the
applicable law, regulation or
condition.
-20-
(2) A certificate of Lender by an
officer setting forth such amount or
amounts as shall be necessary to
compensate Lender with respect to
Section 5(d) hereof when delivered
to Borrower shall be conclusive
absent manifest error.
(e) Matured Funds. On the last day of each month
during the Term, Lender shall credit Borrower's
account with interest at the Matured Funds Rate in
effect during such month on the average daily balance
during such month of any amounts payable by Lender to
Borrower hereunder which are not drawn by Borrower on
the Settlement Date.
6. Security Interest.
(a) Pursuant to the Original Agreement, Greka, Saba
and Santa ▇▇▇▇▇ hereby ratify and reaffirm the security interest of Lender in
the Collateral as created and perfected pursuant to the Original Agreement
("Prior Security Interests"). Greka, Saba and Santa ▇▇▇▇▇ hereby confirm and
agree that the UCC-1 financing statements executed and delivered in connection
with the Original Agreement remain in full force and effect and continue to
perfect the Prior Security Interest and the security interests created hereby.
All security interests created hereby shall be in addition and supplemental to
that created as aforesaid and shall relate back to the date of the Prior
Security Interests.
(b) In extension of and without limiting the
provisions of Section 6(a) above, to secure the prompt payment to Lender of the
Obligations, Borrower hereby assigns, pledges and grants to Lender a continuing
security interest in and to the Collateral, whether now owned or existing or
hereafter acquired or arising and wheresoever located (whether or not the same
is subject to Article 9 of the Uniform Commercial Code). All of the Borrower's
ledger sheets, files, records, books of account, business papers and documents
relating to the Collateral shall, until delivered to or removed by Lender, be
kept by Borrower in trust for Lender until all Obligations have been paid in
full. Each confirmatory assignment schedule or other form of assignment
hereafter executed by Borrower shall be deemed to include the foregoing grant,
whether or not the same appears therein.
(c) Lender may file one or more financing statements
disclosing Lender's security interest in the Collateral without Borrower's
signature appearing thereon or Lender may sign on Borrower's behalf as provided
in Section 13 hereof. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement. If
any Receivable becomes evidenced by a promissory note or any other instrument
for the payment of money, Borrower will immediately deliver such instrument to
Lender appropriately endorsed.
-21-
7. Representations Concerning the Collateral.
Borrower represents and warrants (each of which such representations and
warranties shall be deemed repeated upon the making of each request for a
Revolving Credit Advance and made as of the time of each and every Revolving
Credit Advance hereunder):
(a) all the Collateral (i) is owned by Borrower free
and clear of all claims, liens, security interests and encumbrances (including
without limitation any claims of infringement) except (A) those in Lender's
favor and (B) Permitted Liens and (ii) is not subject to any agreement
prohibiting the granting of a security interest or requiring notice of or
consent to the granting of a security interest;
(b) all Receivables (i) represent complete bona fide
transactions which require no further act under any circumstances on Borrower's
part to make such Receivables payable by Customers, (ii) to the best of
Borrower's knowledge, are not subject to any present, future or contingent
Disputes; (iii) do not represent ▇▇▇▇ and hold sales, consignment sales,
guaranteed sales, sale or return or other similar understandings or obligations
of any Affiliate or Subsidiary of Borrower; (iv) included in any Borrowing Base
Certificate as an Eligible Receivable meets all criteria specified in the
definition of Eligible Receivables, except as may otherwise be specifically
disclosed in such Borrowing Base Certificate or as otherwise theretofore
disclosed in writing to Lender; and (v) Borrower has no knowledge of any fact or
circumstance not disclosed to Lender in the pertinent Borrowing Base Certificate
or otherwise in writing, which would impair the validity or collectibility of
any Receivable and that all documents in connection with each Receivable are
genuine.
(c) in the event any amounts due and owing from any
account debtor to Borrower on any Eligible Receivable shall become subject to
any Dispute, or to any other adjustment otherwise permitted to be made in
accordance with the terms and provisions hereof in the ordinary course of
business and prior to the occurrence of an Event of Default hereunder, Borrower
agrees that it shall, at the time of the submission of the next Borrowing Base
Certificate required to be delivered to Lender immediately following the date on
which Borrower learns thereof, provide Lender with notice thereof. Borrower
further agrees that it shall also notify Lender promptly of all returns and
credits in respect of any Receivables included within a Borrowing Base
Certificate, which notice shall specify the Receivables affected.
8. Covenants Concerning the Collateral. During the
Term, Borrower covenants that it shall:
(a) not dispose of any of the Collateral whether by
sale, lease or otherwise except for (i) the sale of Inventory in the ordinary
course of business, and (ii) the disposition or transfer of obsolete and wornout
Equipment in the ordinary course of business during any fiscal year of Borrower
having an aggregate fair market value of not more than $250,000 and only to the
extent that (x) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Lender's first priority security
interest or (y) the proceeds of which are remitted to Lender in reduction of the
Obligations;
-22-
(b) not encumber, mortgage, pledge, assign or grant
any security interest in any Collateral or any of Borrower's other assets to
anyone other than Lender except as set forth on Schedule 1(C) attached hereto
and made a part hereof;
(c) place notations upon Borrower's books of account
and any financial statement prepared by Borrower to disclose Lender's security
interest in the Collateral;
(d) defend the Collateral against the claims and
demands of all parties.
(e) keep and maintain the Collateral in good
operating condition, except for ordinary wear and tear, and shall make all
necessary repairs and replacements thereof so that the value and operating
efficiency shall at all times be maintained and preserved. Borrower shall not
permit any such items to become a fixture to real estate or accessions to other
personal property;
(f) not extend the payment terms of any Receivable
without prompt notice thereof to Lender;
(g) perform all other steps requested by Lender to
create and maintain in Lender's favor a valid perfected first security interest
in all Collateral; and
(h) promptly provide Lender with duplicate originals
of all credits which Borrower issues to its Customers and immediately notify
Lender of any merchandise returns or Disputes. Borrower shall settle all
Disputes at no cost or expense to Lender. Should Lender so elect, upon the
occurrence of any Event of Default, Lender may at any time in its discretion (i)
withdraw Borrower's authority to issue credits to its Customers without Lender's
prior written consent; (ii) litigate Disputes or settle them directly with
Customers on terms acceptable to Lender; or (iii) direct Borrower to set aside
and identify as Lender's property any returned or repossessed merchandise or
other goods which by sale resulted in Receivables theretofore assigned to Lender
("Retained Goods"). All Retained Goods (and the proceeds thereof) shall be (A)
held by Borrower in trust for Lender as Lender's property, (B) subject to
Lender's security interest hereunder, and (C) disposed of only in accordance
with Lender's express written instructions.
-23-
9. Collection and Maintenance of Collateral and
Records. Lender may at any time verify Borrower's Receivables utilizing an audit
control company or any other agent of Lender. Lender or Lender's designee may
notify Customers, at any time at Lender's sole discretion, of Lender's security
interest in Receivables, collect them directly and charge the collection costs
and expenses to Borrower's account, but, unless and until Lender does so or
gives Borrower other instructions, Borrower shall instruct all of its Customers
to make payments on account of Receivables to an account under Lender's dominion
and control at such bank as Lender may designate, as provided by the terms of
Section 23. To the extent Borrower receives any payments on account of
Receivables, it shall hold such payments for Lender's benefit in trust as
Lender's trustee and immediately deliver them to Lender in their original form
with all necessary endorsements or, as directed by Lender, deposit such payments
as directed by Lender pursuant to Section 22 hereof. Lender will credit
(conditional upon final collection) all such payments to Borrower's account on
the Settlement Date. Promptly after the creation of any Receivables, Borrower
shall provide Lender with schedules describing all Receivables created or
acquired by Borrower and shall execute and deliver confirmatory written
assignments of such Receivables to Lender, but Borrower's failure to execute and
deliver such schedules or written confirmatory assignments of such Receivables
shall not affect or limit Lender's security interest or other rights in and to
the Receivables. Borrower shall furnish, at Lender's request, copies of
contracts, invoices or the equivalent, and any original shipping and delivery
receipts for all merchandise sold or services rendered and such other documents
and information as Lender may require. All of Borrower's invoices shall bear the
terms stated on the applicable customer order, and no change from the original
terms of such customer order shall be made without the prior written consent of
Lender. Borrower shall provide Lender on a monthly (within ten (10) days after
the end of each month), or more frequent basis, as requested by Lender, a
summary report of Borrower's current Inventory, certified as true and accurate
by Borrower's President or Chief Financial Officer, as well as an aged trial
balance of Borrower's existing accounts payable. Borrower shall provide Lender,
as requested by Lender, such other schedules, documents and/or information
regarding the Collateral as Lender may require. Without limiting the foregoing,
Borrower shall provide to Lender a borrowing base certificate upon Santa Maria's
invoicing of customers, but no less frequently than weekly ("Borrowing Base
Certificate"), which must be in form and substance acceptable to Lender and
which Borrowing Base Certificate shall certify to Lender, and shall contain
sufficient information and calculations as Lender may deem necessary or
desirable, in order to verify any Receivables Availability, Inventory
Availability, the applicable Formula Amount and whether or not Receivables
and/or Inventory included therein are Eligible Receivables and/or Eligible
Inventory. Without limiting the foregoing, a Borrowing Base Certificate must be
executed and delivered by Borrower to Lender at the time of or prior to each
request for Revolving Credit Advances pursuant to Section 4. Each such Borrowing
Base Certificate shall be delivered to Lender at its office described in Section
26 below, on each relevant Business Day.
10. Inspections. During normal business hours, and,
so long as no Event of Default or Incipient Event of Default shall have occurred
hereunder, upon thirty-six (36) hours prior notice to Borrower, Lender shall
have the right to (a) visit and inspect Borrower's properties and the
Collateral, (b) inspect, audit and make extracts from Borrower's relevant books
and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants, Borrower's business, assets, liabilities, financial
condition, results of operations and business prospects. Borrower will deliver
to Lender any instrument necessary for Lender to obtain records from any service
bureau maintaining records for Borrower.
-24-
11. Financial Information. Borrower shall provide
Lender (a) as soon as available, but in any event within ninety (90) days after
the end of each of Borrower's fiscal years, Borrower's balance sheet as at the
end of such fiscal year and the related statements of income, retained earnings
and statement of cash flow for such fiscal year, setting forth in comparative
form the figures as at the end of and for the previous fiscal year, which shall
have been reported on by independent certified public accountants who shall be
satisfactory to Lender and shall be accompanied by an unqualified audit report
issued by such independent certified public accountants; (b) as soon as
available, drafts of Borrower's balance sheet as at the end of each of
Borrower's fiscal years and the related statements of income, retained earnings
and statement of cash flow for such fiscal year, which have been internally
prepared by Borrower; (c) as soon as available, but in any event within thirty
(30) days after the close of each month and quarter, the balance sheet as at the
end of such month and quarter and the related statements of income, retained
earnings and changes in statement of cash flow for such month and quarter, which
have been internally prepared by Borrower. All financial statements required
under (a), (b) and (c) above shall be prepared in accordance with GAAP, subject
to year end adjustments in the case of monthly and quarterly statements.
Together with the financial statements furnished pursuant to (a) above, Borrower
shall deliver a certificate of Borrower's certified public accountants addressed
to Lender stating that (i) they have caused this Agreement and the Ancillary
Agreements to be reviewed and (ii) in making the examination necessary for the
issuance of such financial statements, nothing has come to their attention to
lead them to believe that any Event of Default or Incipient Event of Default
exists and, in particular, they have no knowledge of any Event of Default or
Incipient Event of Default or, if such is not the case, specifying such Event of
Default or Incipient Event of Default and its nature, when it occurred and
whether it is continuing. At the times the financial statements are furnished
pursuant to (a), (b) and (c) above, a certificate of Borrower's President or
Chief Financial Officer shall be delivered to Lender stating that, based on an
examination sufficient to enable him to make an informed statement, no Event of
Default or Incipient Event of Default exists, or, if such is not the case,
specifying such Event of Default or Incipient Event of Default and its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such event. If any internally prepared financial information,
including that required under this section, is unsatisfactory in any manner to
Lender, Lender may request that Borrower's independent certified public
accountants review same.
In addition to the foregoing financial statements,
Borrower shall furnish Lender no less than thirty (30)
days prior to the beginning of each fiscal year commencing with fiscal year
2000, a month by month projected operating budget and cash flow for such fiscal
year (including an income statement for each month and a balance sheet as at the
end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by Borrower's President or Chief Financial
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
12. Additional Representations, Warranties and
Covenants. Borrower represents and warrants (each of which such representations
and warranties shall be deemed repeated upon the making of a request for a
Revolving Credit Advance and made as of the time of each Revolving Credit
Advance made hereunder), and covenants that:
(a) Saba and Santa ▇▇▇▇▇ is each a corporation duly
organized and validly existing under the laws of the State of California and
Greka is a corporation duly organized and validly existing under the laws of the
State of Colorado and each Borrower is duly qualified and in good standing in
every other state or jurisdiction in which the nature of Borrower's business
requires such qualification except where the failure to qualify would not have a
material adverse effect on the Borrower's business.;
-25-
(b) the execution, delivery and performance of this
Agreement and the Ancillary Agreements (i) have been duly authorized, (ii) are
not in contravention of Borrower's certificate of incorporation, by-laws or of
any indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound and (iii) are within Borrower's corporate powers;
(c) this Agreement and the Ancillary Agreements
executed and delivered by Borrower are Borrower's legal, valid and binding
obligations, enforceable in accordance with their terms;
(d) it keeps and will continue to keep all of its
books and records concerning the Collateral at Borrower's executive offices
located at the address set forth in the introductory paragraph of this Agreement
and will not move such books and records without giving Lender at least thirty
(30) days prior written notice;
(e) (1) the operation of Borrower's business and the
Collateral is and will continue to be in compliance in all material respects
with all applicable federal, state and local laws, including but not limited to
all applicable environmental laws and regulations and Sanction/Embargo Programs.
(2) Borrower has established and maintained
and will continue to maintain a system to assure and monitor continued
compliance with all applicable environmental laws, and Sanction/Embargo
Programs, which system shall include periodic reviews of such compliance.
(3) in the event the Borrower obtains, gives
or receives notice of any release or threat of release of a reportable quantity
of any Hazardous Substances on its property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions on its property, demand
letter or complaint, order, citation, or other written notice with regard to any
Hazardous Discharge or violation of any environmental laws affecting its
property or Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person or entity, including any
state agency responsible in whole or in part for environmental matters in the
state in which such property is located or the United States Environmental
Protection Agency (any such person or entity hereinafter the "Authority"), then
the Borrower shall, within five (5) Business Days, give written notice of same
to the Lender detailing facts and circumstances of which the Borrower is aware
giving rise to the Hazardous Discharge or Environmental Complaint and
periodically inform Lender of the status of the matter. Such information is to
be provided to allow the Lender to protect its security interest in the
Collateral and is not intended to create nor shall it create any obligation upon
the Lender with respect thereto.
-26-
(4) Borrower shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all necessary action in
order to safeguard the health of any Person and to avoid subjecting the
Collateral to any lien, charge, claim or encumbrance. If Borrower shall fail to
respond promptly to any Hazardous Discharge or Environmental Complaint or
Borrower shall fail to comply with any of the requirements of any environmental
laws, the Lender may, but without the obligation to do so, for the sole purpose
of protecting the Lender's interest in Collateral: (A) give such notices or (B)
enter onto Borrower's property (or authorize third parties to enter onto such
property) and take such actions as the Lender (or such third parties as directed
by the Lender) deem reasonably necessary or advisable, to clean up, remove,
mitigate or otherwise deal with any such Hazardous Discharge or Environmental
Complaint. All reasonable costs and expenses directly incurred by the Lender (or
such third parties) in the exercise of any such rights, including any sums paid
in connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Revolving Credit Advances shall be paid upon demand by the
Borrower, and until paid shall be added to and become a part of the Obligations
secured by the liens created by the terms of this Agreement or any other
agreement between Lender and Borrower.
(5) Borrower shall defend and indemnify the
Lender and hold the Lender harmless from and against all loss, liability, damage
and expense, claims, costs, fines and penalties, including attorney's fees,
directly suffered or incurred by the Lender under or on account of A. any
environmental laws, including, without limitation, the assertion of any lien
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting Borrower's property, whether or not the same
originates or emerges from Borrower's property or any contiguous real estate,
including any loss of value of the Collateral as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of the Lender, and B.
any Sanction/Embargo Program. The Borrower's obligations under Section 12(e)(v)
A. shall arise upon the discovery of the presence of any Hazardous Substances on
the Borrower's property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazardous Substances, and under Section 12(e)(v) B on failure to
comply with any Sanction/Embargo Program. The Borrower's obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
(6) For purposes of Section 12(e) all
references to Borrower's property shall be deemed to include all of Borrower's
right, title and interest in and to all owned and/or leased premises;
(f) based upon the Employee Retirement Income
Security Act of 1974 ("ERISA"), as amended, and the regulations and published
interpretations thereunder: (i) Borrower has not engaged in any Prohibited
Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder; (ii) Borrower has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of its plans, if any; (iii) Borrower has
no knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any employee benefit plan(s); (iv) Borrower has no fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than Borrower's employees; and (v) Borrower has not withdrawn,
completely or partially, from any multiemployer pension plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980;
-27-
(g) it is solvent, able to pay its debts as they
mature, has capital sufficient to carry on its business and all businesses in
which it is about to engage and the fair saleable value of its assets
(calculated on a going concern basis) is in excess of the amount of its
liabilities;
(h) there is no pending or threatened litigation,
actions or proceedings which involve the possibility of materially and adversely
affecting the Borrower's business, assets, operations, condition or prospects,
financial or otherwise, or the Collateral or the ability of Borrower to perform
this Agreement;
(i) all balance sheets and income statements which
have been delivered to Lender fairly, accurately and properly state Borrower's
financial condition on a basis consistent with that of previous financial
statements, and there has been no material adverse change in Borrower's
financial condition as reflected in such statements since the date thereof, and
such statements do not fail to disclose any fact or facts which might materially
and adversely affect Borrower's financial condition;
(j) (x) it possesses all of the licenses, patents,
copyrights, trademarks, trade names and permits necessary to conduct its
business, (y) there has been no assertion or claim of violation or infringement
with respect thereof, and (z) all such licenses, patents, copyrights,
trademarks, trade names and permits are listed on Schedule 12(j);
(k) it will pay or discharge when due all taxes,
assessments and governmental charges or levies imposed upon it;
(l) it will promptly inform Lender in writing of: (i)
the commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental or nongovernmental body and all
actions and proceedings in any court or before any arbitrator against or in any
way concerning any of Borrower's properties, assets or business, involving a
possible liability in excess of $50,000 which might singly or in the aggregate,
have a materially adverse effect on Borrower; (ii) any amendment of Borrower's
certificate of incorporation or by-laws; (iii) any change in Borrower's
business, assets, liabilities, condition (financial or otherwise), results of
operations or business prospects which has had or might have a materially
adverse effect on Borrower; (iv) any Event of Default or Incipient Event of
Default; (v) any default or any event which with the passage of time or giving
of notice or both would constitute a default under any agreement for the payment
of money to which Borrower is a party or by which Borrower or any of Borrower's
properties may be bound which would have a material adverse effect on Borrower's
business, operations, property or condition (financial or otherwise) or the
Collateral; (vi) any change in the location of Borrower's executive offices;
(vii) any change in the location of Borrower's Inventory or Equipment from the
locations listed on Schedule 12(l) attached hereto, (viii) any change in
Borrower's corporate name; (ix) any material delay in Borrower's performance of
any of its obligations to any Customer and of any assertion of any material
claims, offsets, counterclaims or Disputes by any Customer and of any
allowances, credits and/or other monies granted by it to any Customer; (x)
furnish to and inform Lender of all material adverse information relating to the
financial condition of any account debtor; and (xi) any material return of
goods;
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(m) it will not (i) create, incur, assume or suffer
to exist any secured indebtedness (exclusive of trade debt) or unsecured
indebtedness in excess of $250,000, other than Borrower's indebtedness to Lender
and as set forth on Schedule 12(m) attached hereto and made a part hereof; (ii)
declare, pay or make any dividend or distribution on any shares of the common
stock or preferred stock of Borrower or apply any of its funds, property or
assets to the purchase, redemption or other retirement of any common or
preferred stock of Borrower; (iii) directly or indirectly, prepay any
indebtedness (other than to Lender), or repurchase, redeem, retire or otherwise
acquire any indebtedness of Borrower in excess of $250,000 in the aggregate
during any fiscal year of Borrower; (iv) make advances, loans or extensions of
credit to any Person in excess of $250,000 in the aggregate during any fiscal
year of Borrower; (v) become either directly or contingently liable upon the
obligations of any Person by assumption, endorsement or guaranty thereof or
otherwise in excess of $250,000; (vi) enter into any merger, consolidation or
other reorganization with or into any other Person or acquire all or a portion
of the assets or stock of any Person or permit any other Person to consolidate
with or merge with it; (vii) form any Subsidiary or enter into any partnership,
joint venture or similar arrangement; (viii) materially change the nature of the
business in which it is presently engaged; (ix) change its fiscal year or make
any changes in accounting treatment and reporting practices without prior
written notice to Lender except as required by GAAP or in the tax reporting
treatment or except as required by law; (x) enter into any transaction with any
Affiliate, except in the ordinary course of its business on arms' length terms;
or (xi) ▇▇▇▇ Receivables under any name except the present name of the Borrower;
(xii) sell, transfer or lease or otherwise dispose of any of its properties or
assets in excess of $250,000 in the aggregate during any fiscal year of
Borrower, except in the ordinary course of its business;
(n) all financial projections of Borrower's
performance prepared by Borrower or at Borrower's direction and delivered to
Lender will represent, at the time of delivery to Lender, Borrower's best
estimate of Borrower's future financial performance and will be based upon
assumptions which are reasonable in light of Borrower's past performance and
then current business conditions;
(o) Borrower will not make capital expenditures in an
amount in excess of $3,000,000 in the aggregate during Borrower's 2000 fiscal
year. On or before the end of each fiscal year of Borrower, this covenant will
be reset for the immediately succeeding fiscal year at a level mutually
acceptable to Lender and Borrower;
-29-
(p) Borrower shall maintain a fixed charge coverage
ratio (calculated by dividing the sum of dividends, scheduled debt repayment,
interest payments (including cash interest payments to Greka Energy Corporation
and/or Saba Petroleum Company and excluding accrued interest payable to Greka
Energy Corporation and/or Saba Petroleum Company), cash portion of taxes paid,
and cash capital expenditures into EBITDA, all as calculated in accordance with
GAAP) of no less than 1.3:1. For purposes of this Section 12(p), the fixed
charge coverage ratio shall be measured at December 31, 1999 for the immediately
preceding nine (9) months and at March 31, 2000 and for each June 30, September
30, December 31 and March 31 thereafter for the immediately preceding twelve
(12) month period;
(q) it shall cause to be maintained at all times a
ratio of Total Liabilities to Tangible Net Worth plus Subordinated Debt of not
greater than the ratio of: 1.5 to 1 as of Borrower's fiscal quarter ending
December 31, 1999 and continuously thereafter;
(r) the outstanding balance of the Term Loan shall
not at any time exceed 75% of the then current PV 10 value of the Oil and Gas
Properties owned by Borrower. Provided no other Event of Default or Incipient
Event of Default shall have occurred hereunder and Borrower remains in
compliance with all other financial covenants set forth herein, upon the
occurrence of a violation of this covenant, Borrower shall be permitted an
opportunity to cure such violation within 60 days following the occurrence of
any such violation, provided, however, that such cure will not be permitted more
than two (2) times during the Term and not more than once during any consecutive
12 month period.
(s) none of the proceeds of the Loans hereunder will
be used directly or indirectly to "purchase" or "carry" "margin stock" or to
repay indebtedness incurred to "purchase" or "carry" "margin stock" within the
respective meanings of each of the quoted terms under Regulation G of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect;
(t) it will bear the full risk of loss from any loss
of any nature whatsoever with respect to the Collateral. At its own cost and
expense in amounts and with carriers acceptable to Lender, it shall (i) keep all
its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to Borrower's
including, without limitation, business interruption insurance; (ii) maintain a
bond in such amounts as is customary in the case of companies engaged in
businesses similar to Borrower's insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds of
Borrower either directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such workers' compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which Borrower is engaged in business; (v) furnish Lender with
(x) copies of all policies and evidence of the maintenance of such policies at
least thirty (30) days before any expiration date, and (y) appropriate loss
payable endorsements in form and substance satisfactory to Lender, naming Lender
as loss payee and providing that as to Lender the insurance coverage shall not
be impaired or invalidated by any act or neglect of Borrower and the insurer
will provide Lender with at least thirty (30) days notice prior to cancellation.
Borrower shall instruct the insurance carriers that in the event of any loss
thereunder, the carriers shall make payment for such loss to Lender and not to
Borrower and Lender jointly. If any insurance losses are paid by check, draft or
other instrument payable to Borrower and Lender jointly, Lender may endorse
Borrower's name thereon and do such other things as Lender may deem advisable to
reduce the same to cash. Lender is hereby authorized to adjust and compromise
claims. All loss recoveries received by Lender upon any such insurance may be
applied to the Obligations, in such order as Lender in its sole discretion shall
determine. Notwithstanding the foregoing, to the extent that any insurance
proceeds received by Lender do not belong to Borrower or result from the loss of
property of Borrower which is not Collateral, Lender will return such proceeds
to Borrower. Any surplus shall be paid by Lender to Borrower or applied as may
be otherwise required by law. Any deficiency thereon shall be paid by Borrower
to Lender, on demand; and
-30-
(u) it shall not purchase or acquire obligations or
stock of, or any other interest in, or make any investment in any entity, except
(A) obligations issued or guaranteed by the United States of America or any
agency thereof, (B) commercial paper with maturities of not more than 180 days
and a published rating of not less than A-1 or P-1 (or the equivalent rating),
(C) certificates of time deposit and bankers' acceptances having maturities of
not more than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (x) such bank has a combined
capital and surplus of at least $500,000,000, or (y) its debt obligations, or
those of a holding company of which it is a subsidiary, are rated not less than
A (or the equivalent rating) by a nationally recognized investment rating
agency, (D) U.S. money market funds that invest solely in obligations issued or
guaranteed by the United States of America or an Agency thereof, and (E)
Eurodollar time deposits with financial institutions with a published rating of
not less than A-1 or P-1 (or the equivalent rating).
(v) (1) Borrower and its Subsidiaries have reviewed
the effect that the Year 2000 Issue would have on their respective businesses.
The costs to Borrower and its Subsidiaries of any reprogramming required to
avoid the Year 2000 Issue to permit the proper functioning of Borrower's and its
Subsidiaries' computer software, hardware and firmware systems and equipment
containing embedded microchips and the proper processing of data, and the
testing of such reprogramming, and of the reasonably foreseeable consequences of
the Year 2000 Issue to Borrower and its Subsidiaries (including reprogramming
errors and the failure of systems or equipment supplied by others or with which
Borrower's and its Subsidiaries' computer systems interface) are not reasonably
expected to result in an Event of Default or to have a material adverse effect
on Borrower's or its Subsidiaries' businesses, assets, operations, prospects or
condition (financial or otherwise).
(2) Borrower has evaluated and assessed the
potential impact of the Year 2000 Issue upon Borrower's and its Subsidiaries'
customers, key suppliers and vendors and their efforts to manage the risks
arising out of the Year 2000 Issue, and Borrower has determined that Borrower's
and its Subsidiaries' businesses, assets, operations, prospects and condition
(financial and otherwise) shall not be materially adversely affected by any such
impact or risks.
-31-
(3) Borrower shall take, and shall cause each
of its Subsidiaries to take, all necessary action to complete in all material
respects, the reprogramming of computer software, hardware and firmware systems
and equipment containing embedded microchips owned or operated by or for
Borrower and its Subsidiaries or used or relied upon in the conduct of their
businesses (including systems and equipment supplied by others or with which
such systems of Borrower or any of its Subsidiaries interface) reasonably
necessary to avoid the Year 2000 Issue to permit the proper functioning of such
computer systems and other equipment and the proper processing of data, and the
testing of such systems and equipment, as so reprogrammed. At the request of
Lender, Borrower shall provide, and shall cause each of its Subsidiaries to
provide, to Lender reasonable assurance of its compliance with the preceding
sentence.
(w) Borrower will cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to remain
active in the management of Borrower as the Chairman, Chief Executive Officer,
President and director of Borrower for a period of at least two (2) years
following the Closing Date.
(x) In the event that any Borrower shall sell or
dispose of any real property or in the event Borrower shall sell any subsidiary,
all proceeds of such sale shall first be applied to repay amounts outstanding
under the Term Loan. Such payments will be applied by Lender in the inverse
order of maturity.
(y) Borrower will use the proceeds of Revolving
Credit Advances only for its proper working capital purposes. Borrower will use
the proceeds of the Term Loan only for the purchase of the Santa ▇▇▇▇▇ Oil and
Gas Properties, the Vintage Oil and Gas Properties and the refinancing of
Borrower's existing indebtedness to Lender.
(z) Santa ▇▇▇▇▇ shall not transfer any of its assets
to any other Borrower.
(aa) Upon the occurrence of any Event of Default
hereunder, Borrower shall immediately cease any and all payments to Greka Energy
Corporation. Until the occurrence of any Event of Default Borrower may make
distributions of funds to Greka Energy Corporation in the ordinary course of its
business.
(bb) Borrower shall at all times maintain a minimum
Tangible Net Worth of at least $26,000,000.
(cc) Additional Warranties. Santa ▇▇▇▇▇ covenants,
represents and warrants that:
(1) Interests in Property. Santa ▇▇▇▇▇ is and
will continue to be the lawful owner of the property more particularly described
on Schedule 12(cc) annexed hereto ( the Property") and the interests of Santa
▇▇▇▇▇ in the Property, as set forth in Schedule12(cc) hereto, are true and
correct as of the date hereof and shall not change so long as any of the
Obligations remain outstanding.
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(2) Leases in Effect. All of the Leases
specifically described in Schedule 12(cc) hereof (the "Leases") are in full
force and effect, and all covenants, express or implied, in respect thereof, or
of any assignment thereof which may affect the validity of any of the Leases,
have been performed.
(3) Gas Contracts. Santa ▇▇▇▇▇ (i) is not
obligated in any material respect by virtue of any prepayment made under any
contract containing a "take-or-pay" or "prepayment" provision or under any
similar agreement to deliver hydrocarbons produced from or allocated to any of
the Property at some future date without receiving full payment therefor at the
time of delivery, and (ii) has not produced gas, in any material amount, subject
to, and neither Santa ▇▇▇▇▇ nor any of the Property is subject to, balancing
rights of third parties or balancing duties under governmental requirements,
except as to such matters for which Santa ▇▇▇▇▇ has established monetary
reserves adequate in amount to satisfy such obligations and has segregated such
reserves from other accounts.
(4) Refunds. No orders of, proceedings pending
before, or other governmental requirements of, the Federal Energy Regulatory
Commission, or any other similar state or federal regulatory body or
governmental authority exist which could result in Santa ▇▇▇▇▇ being required to
refund any material portion of the proceeds received or to be received from the
sale of hydrocarbons constituting part of the Property.
(5) Maintenance of Leases. Santa ▇▇▇▇▇ will
keep and continue all Leases, estates and interests herein described and all
contracts and agreements relating thereto in full force and effect in accordance
with the terms thereof and will not permit the same to lapse or otherwise become
impaired for failure to comply with the obligations thereof, whether express or
implied. In this connection, Santa ▇▇▇▇▇ shall not release any of the Leases
without the prior written consent of Lender.
(6) Operation of Property. Santa ▇▇▇▇▇ shall
operate or, to the extent that the right of operation is vested in others, will
exercise its best efforts to require the operator to operate the Property and
all ▇▇▇▇▇ drilled thereon and that may hereafter be drilled thereon,
continuously and in good workmanlike manner in accordance with the best usage of
the field and in accordance with all laws of the United States of America and
the state in which the Property is situated, as well as all rules, regulations
and laws of any governmental agency having jurisdiction to regulate the manner
in which the operation of the Property shall be carried on, and will comply with
all terms and conditions of the Leases it now holds and each assignment or
contract obligating Santa ▇▇▇▇▇ in any way with respect to the Property; but
nothing herein shall be construed to empower Santa ▇▇▇▇▇ to bind the Lender to
any contract or obligation or render the Lender in any way responsible or liable
for bills or obligations incurred by Santa ▇▇▇▇▇.
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(7) Transfer or Division Orders. Upon request
of Lender, Santa ▇▇▇▇▇ will execute and deliver written notices of assignments
to any persons, corporations or other entities owing or which may in the future
owe to Santa ▇▇▇▇▇ monies or accounts arising in connection with (a) any oil,
gas or mineral production from all or any portion of the Property; (b) any gas
contracts, processing contracts or other contracts relating to all or any
portion of the Property; or (c) the operation of or production from all or any
portion of the Property. The notices of assignments shall advise the third
parties that all of the monies or accounts described above have been assigned to
Lender, and if required by Lender, shall also require and direct that future
payments thereof, including amounts then owing and unpaid, be paid directly to
Lender.
(8) Uneconomic ▇▇▇▇▇. Should proceeds from the
sale of production from any oil and/or gas well constituting part of the
Property (net of production, severance and windfall profit taxes and royalties,
overriding royalties and other payments out of or measured by production) not
exceed the expense of operation of such well (including, but not limited to,
operator's overhead, payments to contractors and suppliers and annual taxes
assessed on the basis of the value of the property prorated on a monthly basis,
but expressly excluding any portion of the cost of drilling or completing the
relevant well or the cost of non-routine workover or remedial operators) for a
period in excess of three consecutive calendar months, then, upon receipt by
Santa ▇▇▇▇▇ of written notification from Lender, Santa ▇▇▇▇▇ will (a) take all
necessary steps to abandon the relevant well, or (b) provide from sources other
than proceeds from the sale of production attributable to the Property (i.e.,
through borrowings or contractual commitments obtained from third parties not in
violation of any provision of this Deed of Trust) the funds required to pay the
share of Santa ▇▇▇▇▇ of the expenses associated with the continuing operation of
such well.
13. Power of Attorney. Borrower hereby
appoints Lender or any other Person whom Lender may designate as Borrower's
attorney, with power to: (i) endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into Lender's possession; (ii) sign Borrower's name on any invoice or ▇▇▇▇
of lading relating to any Receivables, drafts against Customers, schedules and
assignments of Receivables, notices of assignment, financing statements and
other public records, verifications of account and notices to or from Customers;
(iii) verify the validity, amount or any other matter relating to any Receivable
by mail, telephone, telegraph or otherwise with Customers; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) do all things necessary to carry out this Agreement, any
Ancillary Agreement and all related documents; and (vi) on or after the
occurrence and continuation of an Event of Default, notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender, and to receive, open and dispose of all mail addressed to
Borrower. Borrower hereby ratifies and approves all acts of the attorney.
Neither Lender nor the attorney will be liable for any acts or omissions or for
any error of judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable so long as any Receivable which is assigned to
Lender or in which Lender has a security interest remains unpaid and until the
Obligations have been fully satisfied.
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14. Expenses. Borrower shall pay all of
Lender's out-of-pocket costs and expenses, including without limitation
reasonable fees and disbursements of counsel retained or employed by Lender and
appraisers, in connection with the preparation, execution and delivery of this
Agreement and the Ancillary Agreements, and in connection with the prosecution
or defense of any action, contest, dispute, suit or proceeding concerning any
matter in any way arising out of, related to or connected with this Agreement or
any Ancillary Agreement. Borrower shall also pay all of Lender's out-of-pocket
costs and expenses, including without limitation reasonable fees and
disbursements of counsel retained or employed by Lender, in connection with (a)
the preparation, execution and delivery of any waiver, any amendment thereto or
consent proposed or executed in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements, (b) Lender's obtaining performance
of the Obligations under this Agreement and any Ancillary Agreements, including,
but not limited to, the enforcement or defense of Lender's security interests,
assignments of rights and liens hereunder as valid perfected security interests,
(c) any attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of any Collateral, and (d) any consultations in connection
with any of the foregoing. Borrower shall also pay Lender's then standard price
for furnishing Borrower or its designees copies of any statements, records,
files or other data (collectively, "Reports") requested by Borrower or its
designees, other than reports of the kind furnished to Borrower and Lender's
other borrowers on a regular, periodic basis in the ordinary course of Lender's
business. Borrower shall also pay Lender's customary bank charges, including,
without limitation, all wire transfer fees incurred by Lender, for all bank
services performed or caused to be performed by Lender for Borrower at
Borrower's request. All such costs and expenses together with all filing,
recording and search fees, taxes and interest payable by Borrower to Lender
shall be payable on demand and shall be secured by the Collateral. If any tax by
any governmental authority is or may be imposed on or as a result of any
transaction between Borrower and Lender which Lender is or may be required to
withhold or pay, Borrower agrees to indemnify and hold Lender harmless in
respect of such taxes, and Borrower will repay to Lender the amount of any such
taxes which shall be charged to Borrower's account; and until Borrower shall
furnish Lender with indemnity therefor (or supply Lender with evidence
satisfactory to it that due provision for the payment thereof has been made),
Lender may hold without interest any balance standing to Borrower's credit and
Lender shall retain its security interests in any and all Collateral. Borrower
hereby acknowledges that Lender shall not be liable in any manner whatsoever for
any selling expenses, orders, purchases or contracts of any kind resulting from
any transaction between Borrower and any other Person, and Borrower hereby
indemnifies and holds Lender harmless with respect thereto, which indemnity
shall survive termination of this Agreement.
15. Assignment. Lender may assign any or all
of the Obligations together with any or all of the security therefor and any
transferee shall succeed to all of Lender's rights with respect thereto.
Borrower shall be promptly notified of any such assignment. Notwithstanding the
foregoing, Lender shall not knowingly Transfer the Obligations (or any
substantial portion thereof) to any person or entity (i) whose primary source of
revenue is from gas or oil production and (ii) with whom Borrower's business
materially competes in conflict of Borrower's interest. As used in this Section
15, "Transfer" shall mean a voluntary sale, assignment or conveyance to a
separate legal entity from the Lender and no Transfer shall occur as a result of
merger, acquisition, consolidation or by operation of law. Upon such transfer,
Lender shall be released from all responsibility for the Collateral to the
extent same is assigned to any transferee. Lender may from time to time sell or
otherwise grant participations in any of the Obligations and the holder of any
such participation shall, subject to the terms of any agreement between Lender
and such holder, be entitled to the same benefits as Lender with respect to any
security for the Obligations in which such holder is a participant. Borrower
agrees that each such holder may exercise any and all rights of banker's lien,
set-off and counterclaim with respect to its participation in the Obligations as
fully as though Borrower were directly indebted to such holder in the amount of
such participation. Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Lender,
and no such assignment or transfer of any such obligation shall relieve Borrower
thereof unless Lender shall have consented to such release in a writing
specifically referring to the obligation from which Borrower is to be released.
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16. Waivers. Borrower waives presentment and
protest of any instrument and notice thereof, notice of default and all other
notices to which Borrower might otherwise be entitled.
17. Term of Agreement. Lender may terminate
this Agreement at any time upon one hundred and twenty (120) days' prior written
notice to Borrower. If not so terminated, this Agreement shall continue in full
force and effect until the expiration of the Term. The Term shall be
automatically extended for successive periods of one (1) year each unless either
party shall have provided the other with a written notice of termination, at
least ninety (90) days prior to the expiration of the initial Term or any
renewal Term. The Borrower may terminate this Agreement at any time upon sixty
(60) days' prior written notice ("Termination Date") upon payment in full of the
Obligations; provided, that Borrower pays an early termination fee in an amount
equal to the Required Percentage of the Reducing Facility Amount. Reducing
Facility Amount shall mean $10,000,000, plus the outstanding balance of the Term
Loan as of the date of termination (without giving effect to any prepayments
made on the Term Loan). For the purposes hereof, Required Percentage shall mean
(a) 3% from the Closing Date through November 29, 2001, (b) 2% from November 30,
2001 through November 29, 2002 and (c) 1% from November 30, 2002 through
November 29, 2003 and during any year of any renewal Term.
18. Events of Default. The occurrence of any
of the following shall constitute an Event of Default:
(a) failure to make payment of any of the
Obligations when required hereunder;
(b) failure to pay any taxes when due unless
such taxes are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been provided on Borrower's books;
(c) failure to perform under and/or committing
any breach of this Agreement or any Ancillary Agreement or any other agreement
between Borrower and Lender or failure to perform any non-monetary obligation
with respect to which a cure is expressly permitted hereunder within thirty (30)
days following the occurrence of such failure;
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(d) occurrence of a default under any
agreement to which Borrower is a party with third parties which has a material
adverse affect upon Borrower's business, operations, property or condition
(financial or otherwise) including all leases for any premises where Inventory
or Equipment is located;
(e) any representation, warranty or statement
made by Borrower hereunder, in any Ancillary Agreement, any certificate,
statement or document delivered pursuant to the terms hereof, or in connection
with the transactions contemplated by this Agreement should at any time be false
or misleading in any material respect;
(f) an attachment or levy is made upon any of
Borrower's assets having an aggregate value in excess of $250,000,or a judgment
is rendered against Borrower or any of Borrower's property involving a liability
of more than $250,000, which shall not have been vacated, discharged, stayed or
bonded pending appeal or reconsideration within sixty (60) days from the entry
thereof;
(g) any change in Borrower's condition or
affairs (financial or otherwise) which in Lender's reasonable belief materially
impairs the Collateral or the ability of Borrower to perform its Obligations;
(h) any lien created hereunder or under any
Ancillary Agreement for any reason ceases to be or is not a valid and perfected
lien having a first priority interest other than as to assets which are subject
to Permitted Liens which are purchase money security interests, but only to the
extent Lender's lien is not a first priority security interest in such assets;
(i) Borrower shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(j) Borrower shall admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business;
(k) Greka Energy Corporation shall (i) apply
for or consent to the appointment of, or the taking possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) admit in writing its inability, or be generally unable, to
pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws,
or(viii) take any action for the purpose of effecting any of the foregoing;
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(l) Borrower directly or indirectly sells,
assigns, transfers, conveys, or suffers or permits to occur any sale,
assignment, transfer or conveyance of any assets of Borrower or any interest
therein, except as permitted herein;
(m) Borrower fails to operate in the ordinary
course of business;
(n) Lender shall in good ▇▇▇▇▇ ▇▇▇▇ itself
insecure or unsafe or shall have a reasonable belief that there is or will be a
material diminution in value, removal or material waste of the Collateral;
(o) a default by Borrower in the payment, when
due, of any principal of or interest on any indebtedness for money borrowed in
excess of $250,000;
(p) any Change of Ownership; or
(q) The occurrence of any default under the
Conoco Indemnification Agreement which would have the effect of impairing the
enforceability or financial benefits to Borrower of such Agreement;
19. Remedies. (a) Upon the occurrence of an
Event of Default pursuant to Section 18 (i) herein, all Obligations shall be
immediately due and payable and this Agreement shall be deemed terminated; upon
the occurrence and continuation of any other of the Events of Default, Lender
shall have the right to demand repayment in full of all Obligations, whether or
not otherwise due and/or to terminate this Agreement without advance notice.
Until all Obligations have been fully satisfied, Lender shall retain its
security interest in all Collateral. Lender shall have, in addition to all other
rights and remedies provided herein, the rights and remedies of a secured party
under the Uniform Commercial Code, and under other applicable law, all other
legal and equitable rights to which Lender may be entitled, including without
limitation, the right to take immediate possession of the Collateral, to require
Borrower to assemble the Collateral, at Borrower's expense, and to make it
available to Lender at a place designated by Lender which is reasonably
convenient to both parties and to enter any of the premises of Borrower or
wherever the Collateral shall be located, with or without force or process of
law, and to keep and store the same on said premises until sold (and if said
premises shall be the property of Borrower, Borrower agrees not to charge Lender
for storage thereof for a period up to at least sixty (60) days after sale or
disposition of said Collateral). Further, Lender may, at any time or times after
default by Borrower, sell and deliver all Collateral held by or for Lender at
public or private sale for cash, upon credit or otherwise, at such prices and
upon such terms as Lender, in Lender's sole discretion, deems advisable, or
Lender may otherwise recover upon the Collateral in any commercially reasonable
manner as Lender, in its sole discretion, deems advisable. Except as to that
part of the Collateral which is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the requirement
of reasonable notice shall be met if such notice is mailed postage prepaid to
Borrower at Borrower's address as shown in Lender's records, at least ten (10)
days before the time of the event of which notice is being given. Lender may be
the purchaser at any sale, if it is public. In connection with the exercise of
the foregoing remedies, Lender is granted permission to use all of Borrower's
trademarks, trade names, trade styles, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with (a)
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods. The proceeds of
sale shall be applied first to all costs and expenses of sale, including but not
limited to attorneys' fees, and second to the payment (in whatever order Lender
elects) of all Obligations. Lender will return any excess to Borrower and
Borrower shall remain liable to Lender for any deficiency.
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20. Waiver; Cumulative Remedies. Failure by
Lender to exercise any right, remedy or option under this Agreement or any
supplement hereto or any other agreement between Borrower and Lender or delay by
Lender in exercising the same, will not operate as a waiver; no waiver by Lender
will be effective unless it is in writing and then only to the extent
specifically stated. Lender's rights and remedies under this Agreement will be
cumulative and not exclusive of any other right or remedy which Lender may have.
21. Application of Payments. Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times hereafter received by Lender from or on Borrower's behalf,
and Borrower hereby irrevocably agrees that Lender shall have the continuing
exclusive right to apply and reapply any and all payments received at any time
or times hereafter against Borrower's Obligations hereunder in such manner as
Lender may deem advisable notwithstanding any entry by Lender upon any of
Lender's books and records. In the event that Lender shall elect to reapply any
payments hereunder, Lender will not perform such reapplication in a manner which
would result in a payment default under the Term Loan.
22. Depository Accounts. Any payment received
by Borrower on account of any Collateral shall be held by Borrower in trust for
Lender, and Borrower shall promptly deliver same in kind to Lender or deposit
all such payments into a cash collateral account at such bank as Lender may
designate for application to payment of the Obligations. Borrower shall also
execute such further documents as Lender may deem necessary to establish such an
account and all funds deposited in such account shall immediately be deemed
Lender's property.
23. Lock Box Accounts. Borrower shall, at
Lender's request, instruct all of its Customers to make such payments on account
of Receivables to an account under Lender's dominion and control at such bank as
Lender may designate. Borrower shall also execute such further documents as
Lender may deem necessary to establish such an account, and all funds deposited
in such account shall immediately be deemed Lender's property.
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24. Revival. Borrower further agrees that to
the extent Borrower makes a payment or payments to Lender, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment,
the obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made.
25. Syndication. Borrower acknowledges that
after the date hereof, Lender may at any time and from time to time select
additional Co-Lenders to make Loans to Borrower under this Agreement, so that
this Agreement shall then constitute a syndicated credit facility. In such
event, the term "Lender" for all purposes of this Agreement, as well as each of
the other Ancillary Agreements, shall instead refer to GMAC as agent, for the
benefit of itself and each and all of the other Co-Lenders ("Agent"). In any
such case, the Agent shall exclusively make all determinations as to the
management, handling and enforcement of this Agreement in all respects, on
behalf of itself and each of the other Co-Lenders, subject to no limitations
whatsoever. Without limiting the foregoing: (a) the term "Lender" shall mean
each and all of the Co-Lenders in the syndicated facility, including, without
limitation, GMAC or any successor in interest to GMAC, the Agent itself and each
of the other Co-Lenders; (b) each and all of the representations, warranties,
covenants, Collateral and agreements, protections, guarantees, rights and
remedies referred to or otherwise set forth in this Agreement and the Ancillary
Agreements are to run for the benefit of the Agent, on behalf of itself and each
other Co-Lender; and (c) each Co-Lender is accordingly also to have all of the
rights, security interests, remedies and other benefits and protections provided
to the Lender in this Agreement and the Ancillary Agreements, except as
otherwise set forth in this Agreement. Each Co-Lender is also to acknowledge in
writing, to the Agent, the Borrower and each of the other Co-Lenders (if any)
and in a manner satisfactory to the Agent and the Borrower (in the case of the
Borrower on the condition that the Borrower shall not unreasonably withhold its
approval thereto), that it shall be a party to this Agreement as a Co-Lender and
that it shall have all of the responsibilities of the Lender under this
Agreement and the Ancillary Agreements of the Lender and of a Co-Lender in
accordance with the pertinent provisions thereof, including, without limitation,
the manner of the handling of the Loans and the maximum principal dollar amount
of Loans which each such Co-Lender shall be obligated to extend as Loans to the
Borrower as their respective Commitment. Moreover, in any case where an Agent is
acting for itself and other Co-Lenders hereunder, the Borrower agrees to cause
any guarantors to execute and deliver such additional documentation as GMAC, as
Agent (or any successor Agent) may request at any time and from time to time in
order to reflect or evidence that each and all of their respective guarantees,
whether now existing or hereafter arising, run for the benefit and protection of
the Agent, on behalf of itself and the other Co-Lenders and include, without
limitation, all Loans due or to become due to each and all of the Co-Lenders;
provided, however, that such documentation shall permit the payment to Agent on
behalf of Co-Lenders and shall not increase the aggregate liability thereunder.
In the event that such a syndicated facility may exist by reason of the addition
of any Co-Lender(s), GMAC (or any successor Agent as provided for below) is to
act in the capacity of Agent under such syndicated Agreement, for itself as a
Co-Lender entitled to all of the rights and benefits of a Co-Lender and for each
and all of the other Co-Lenders under this Agreement and the Ancillary
Agreements. Without limiting the generality of the foregoing, in the event that
a syndicated facility may exist hereunder by reason of the existence of
Co-Lenders, no Co-Lender other than Agent shall have the right to conduct
audits, declare an Incipient Event of Default or an Event of Default or conduct
due diligence in accordance with this Agreement, establish, set, maintain and
adjust reserves or reserve requirements to the same extent that the Lender is
permitted when a syndicated facility does not exist. As of the Closing Date and
in relation to any such Agent/Co-Lender arrangements, the following additional
provisions are to supplement this Agreement:
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(a) Agent and Co-Lender Provisions. Borrower
recognizes that after the Closing Date, the Lender may, in Lender's sole
discretion: (i) select additional Co-Lenders at any time and from time to time;
and (ii) resign at any time as Agent, provided that such resignation complies
with the terms of this Section 25 (a).
Should the Agent, whether GMAC or any
successor Agent, serve under this Agreement and act for itself and other
Co-Lenders as to the Loans, the following supplemental provisions shall be
applicable and shall survive the termination of any such Co-Lender or agency
relationships:
(1) Authorization and Action. Each of
the Co-Lenders hereby irrevocably appoints and authorizes the Agent to
exclusively take all actions as Agent on its behalf and to exercise all rights,
powers and remedies under this Agreement as are delegated to the Lender or the
Agent by the terms thereof as modified herein, together with such rights, powers
and remedies as are reasonably incidental thereto. The duties of the Agent to
each Co-Lender shall be mechanical and administrative in nature and the Agent
shall not by reason of this Agreement or otherwise be a trustee or a fiduciary
for any of the Co-Lenders. The Agent shall have no duties or responsibilities
except those expressly set forth herein. The Agent shall be fully authorized to
act or to refrain from acting at any time and from time to time in accordance
with its sole discretion under the terms and provisions of this Agreement, the
Ancillary Agreements and each of them. The Agent may at all times act or refrain
from acting without any requirement of seeking the approval or the consent of
any of the Co-Lenders. As to all matters set forth in this Agreement, the Agent
shall not be required to exercise any discretion or take any action, but as
noted herein shall be authorized to act or to refrain from acting (and shall be
fully protected in so acting or so refraining from acting) upon the instructions
of the Majority Lenders, and such instructions shall be binding upon all
Co-Lenders; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or applicable law. It is agreed that the Agent may perform any of
its duties hereunder by or through its officers, directors, agents or employees.
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(2) Liability of Agent. The Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement. Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement as Agent in the absence of its
or their own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent: (A) may consult with legal counsel (including counsel for
the Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (B) makes no warranty or representation to any Co-Lender and shall not
be responsible to any Co-Lender for any statements, warranties or
representations made in or in connection with this Agreement; (C) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants, or conditions of this Agreement on the apart of the
Borrower, or to inspect the property (including the books and records) of the
Borrower; (D) shall not be responsible to any Co-Lender for the due execution,
legality, validity, enforceability, genuineness, perfection, sufficiency, or
value of this Agreement or any other instrument or document furnished pursuant
thereto; and (E) shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by telegram, telex, or facsimile transmission) believed by it to
be genuine and signed or sent by the proper party or parties. Without limiting
the foregoing, the Agent shall have no obligation whatsoever to any of the other
Co-Lenders or to any other Person to assure that the Collateral exists or is
owned by the Borrower or is cared for, protected or insured or that the Liens
granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or continue exercising, any
of the rights, authorities and powers granted or available to the Agent in this
Agreement, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Agent may act in any manner it
may deem appropriate, in its sole discretion, given the Agent's own interest in
the Collateral as one of the Co-Lenders.
(3) Rights of Agent as a Lender. With
respect to its making of Loans under this Agreement, the Agent shall have the
same rights and powers under this Agreement as if and to the same extent as if
the same ran directly to itself or any other Co-Lender and may exercise the same
in the place and stead of each such Co-Lender as though it were not the Agent;
and the term "Lender", "Co-Lender" or "Co-Lenders" shall therefore, unless
otherwise expressly indicated, include the Agent in its individual capacity. The
Agent and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with the
Borrower, its Subsidiaries or Affiliates, and any Person who may do business
with or own securities of the Borrower or any Subsidiary or Affiliate of the
Borrower, all as if the Agent were not the Agent and without any duty to account
therefor to the Co-Lenders.
(4) Independent Credit Decisions. Each
of the Co-Lenders shall acknowledge that it has, independently and without
reliance upon the Agent or any of the other Co-Lenders and based upon such
documents and information as it has deemed appropriate, shall make its own
credit analysis and decision to enter into this Agreement as a Co-Lender and to
be bound by all of the terms and provision hereof, each of the Co-Lenders shall
also acknowledge that it will, independently and without reliance upon the Agent
or any of the other Co-Lenders and based on such documents and information as it
shall deem appropriate, at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement. Except for notices, reports
and other documents and information expressly required to be furnished to the
Co-Lenders by the Agent hereunder, the Agent shall have no duty or
responsibility to provide any of the Co-Lenders with any credit or other
information concerning the affairs, financial condition, or business of the
Borrower, or any Subsidiary or any Affiliate of the Borrower which may come into
the possession of the Agent or any of its Affiliates.
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(5) General Immunity and
Indemnification. Neither the Agent nor any of its directors, officers, agents,
attorneys or employees shall be liable to any Co-lender for any action taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own willful misconduct or gross negligence. The Co-Lenders
agree to indemnify the Agent (to the extent not reimbursed by the Borrower)
ratably according to the respective amounts of their Commitments, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement, or any action
taken or omitted by the Agent under this Agreement, provided that none of the
Co-Lenders shall be liable for any portion of any of the foregoing resulting
from the Agent's gross negligence of willful misconduct. Without limitation of
any of the foregoing, each of the Co-Lenders agrees to reimburse the Agent (to
the extent not reimbursed by the Borrower) promptly upon demand for its ratable
share of any out-of-pocket expenses (including counsel fees) incurred by the
Agent in connection with the preparation, administration, or enforcement of, or
legal advice in respect of, rights or responsibilities under or in relation to
this Agreement. The Borrower unconditionally and without limitation agrees to
indemnify, defend and hold harmless the Agent, on its own behalf and on behalf
of each of the other Co-Lenders, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever, arising out of any
litigations, investigations, claims or proceedings, pending or threatened, which
may be imposed on, incurred by, or asserted against any of such Co-Lenders or
the Agent in any way relating to or arising out of the Borrower and this
Agreement and the Ancillary Agreements but not arising out of a dispute among
any of the Co-Lenders, Lender or the Agent, provided that the Borrower shall not
be liable for any portion of any of the foregoing resulting from the gross
negligence or willful misconduct of the Agent or the Co-Lender, as the case may
be; this indemnity shall survive any termination of this Agreement and payment
in full of the Obligations. Without limitation of any of the foregoing, Borrower
unconditionally agrees to reimburse the Agent and the Co-Lenders, promptly upon
demand in full, for any and all out-of-pocket expenses (including counsel fees
of the Agent) incurred by the Agent in connection with the enforcement of this
Agreement as to the Borrower. In determining whether to become a Co-Lender
hereunder it is recognized that certain out-of-pocket expenses may be incurred
by prospective Co-Lenders (other than the Agent); the Borrower unconditionally
agrees to reimburse the Agent and each such prospective Co-Lender promptly upon
demand in full for any and all out-of-pocket expenses (including counsel fees of
each such prospective Co-Lender) incurred in connection with such review.
(6) Successor Agent. GMAC and any
successor Agent(s) (each, the "Agent") may resign at any time by giving at least
30 days' prior written notice thereof to the Co-Lenders and the Borrower. Any
successor Agent shall be a member of the New York Clearing House, or any other
bank or other financial institution with assets of at least $1 Billion. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all of the
rights, powers, privileges, and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under or in relation
to this Agreement. After retiring, or the Agent's resignation or removal
hereunder as Agent, the provisions of this subsection shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. In the case of any such removal or resignation, however, nothing
contained in this paragraph, is or shall be deemed to limit or change any duties
or responsibilities that the Agent may otherwise have to Borrower as a Co-Lender
under this Agreement, which limitations or changes may only occur in accordance
with other pertinent terms and provisions hereof.
-43-
(7) Revolving Credit. Each of the
Co-Lenders severally agree, on the terms and conditions set forth in this
Agreement, to make Loans to the Borrower from time to time during the period
from the date of their respective Commitment as a Co-Lender hereunder up to and
including the last day of the Term in an aggregate principal amount not to
exceed at any time outstanding the amount set opposite such Co-Lender's name in
a written acknowledgment satisfactory to Agent and to Borrower, provided that
the Borrower shall not unreasonably withhold approval thereof, confirming their
respective undertaking to become a Co-Lender hereunder and to be bound by all of
the terms and provisions hereof, as such amount may be reduced pursuant to the
provisions hereof dealing with "reduction of Commitment". The Agent may, but
shall not be obligated to, advance Loans on behalf of each and all of the
Co-Lenders to the Borrower. It is understood that the obligation of Co-Lenders
to fund Loans hereunder shall be irrevocable and not subject to any
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including
without limitation any lack of validity or enforceability of this Agreement or
any of the Ancillary Agreements, the existence of any claim, setoff, defense or
other right which the Borrower or any third party may have at any time, any
statement of the Borrower or any third party being untrue or inaccurate in any
respect, the surrender or impairment of any Collateral for the performance or
observance of this Agreement or any of the Ancillary Agreements or the
occurrence of any Incipient Event of Default or Event of Default. Each of the
Loans as to which a Co-Lender has so acknowledged its willingness to co-lend
hereunder shall be made available to the Agent by each of the Co-Lenders in
accordance with the terms of this Agreement, and shall be remitted in a timely
manner in the proportion that Co-Lender's Commitment bears to the total amount
of all the Co-Lenders' Commitments hereunder. Without limiting the foregoing,
each Co-Lender agrees that by no later than the day of each Revolving Loan to be
made to the Borrower, it shall deposit its pro rata share thereof, in
immediately available funds, in the Borrower's Loan Account with the Agent, or
in such other account satisfactory to the Agent as the Borrower may from time to
time designate. Within the limits of their respective Commitments, the Borrower
may borrow, repay and reborrow under the revolving Loans.
-44-
The failure of any Co-Lender to make any
requested Revolving Loan to be made by it on the date specified for such Loan,
whether or not such Co-Lender may be a Restricted Co-Lender (as defined and as
described below), shall not relieve it or any other Co-Lender of its respective
obligation (if any) to make Loans hereunder, but no Co-Lender shall be
responsible for the failure of any other Co-Lender to make Loans to be made by
such other Co-Lender(s). In the event, however, that any particular Co-Lender
decides not to fund any of the Loans to the Borrower in accordance with this
Agreement, by reason of any Federal or State banking agency regulatory
supervision, limits, constraints or other restrictions applicable to the overall
business operations of Co-Lender, and arises strictly in relation to general
regulatory difficulties or concerns applicable to that Co-Lender (the
"Restricted Co-Lender"), then: (y) the Restricted Co-Lender unconditionally and
irrevocably agrees with the Agent that the Agent shall, following any such
failure to fund, have the right at any time to seek to replace and to replace
that Restricted Co-Lender with another Co-Lender under this Agreement, or
alternatively, the Agent itself, may be substituted in the place of such
Restricted Co-Lender. Under such circumstances, upon any such replacement
occurring and upon payment to the Restricted Co-Lender by any replacement
Co-Lender, or by the Agent, of the principal balance of all Loans owed to the
Restricted Co-Lender, together with all accrued interest thereon: (A) the
Restricted Co-Lender shall no longer act as a Co-Lender to the Borrower under
this Agreement; and (B) simultaneously, the Restricted Co-Lender shall be deemed
to have fully released and discharged the Agent, the Borrower and each of the
Co-Lenders from any and all obligations, claims and liabilities under or in
relation to this Agreement (but this shall not release or be deemed to release
the Restricted Co-Lender from any claims, liabilities or obligations to the
Agent, the other Co-Lenders, or to the Borrower by reason of the lack of funding
or any related matters); and (z) if and to the extent that the Borrower may
certify in writing to the Agent that the lack of funding of the Borrower by a
Restricted Co-Lender may materially and adversely affect the Borrower's business
operations and for so long as necessary until arrangements with a replacement
Co-Lender may be put into place, the Agent agrees to fund any amount(s) that
otherwise were to have been funded by the Restricted Co-Lender and to increase
the amount of the Agent's Commitment to the Borrower accordingly, until such
time, if any, as replacement Co-Lender arrangements may be finalized.
(8) Loan Account. The Agent shall
maintain a loan account ("Loan Account") in which shall be recorded (i) all
Loans made by the Agent on behalf of the Co-Lenders to the Borrower pursuant to
this Agreement, (ii) all payments made by the Borrower on all such Loans, and
(iii) all other appropriate debits and credits as provided in this Agreement,
including without limitation, all fees, charges, expenses and interest. All
entries in the Borrower's Loan Account shall be made in accordance with the
Agent's customary accounting practices as in effect from time to time.
(9) Notice and Manner of Borrowing. The
Borrower shall give the Agent a Notice of Borrowing under this Agreement, at
least on (1) Business Day before each request for a Revolving Loan, specifying:
(i) the date of such requested Loan; and (ii) the amount of such Loan. The Agent
shall promptly notify each Co-Lender of each such Notice. Not later than 12:00
a.m. (New York Time) on the date of such Revolving Loans, each Co-Lender will
make available to the Agent such Co-Lender's pro rata share of such Revolving
Loans. After the Agent's receipt of such funds not later than 4:00 p.m. (New
York time) on the date of such Revolving Loans, the Agent will make such
requested Revolving Loan available to the Borrower in immediately available
funds, up to an aggregate outstanding amount at any time and from time to time,
not to exceed the Maximum Loan Amount by crediting the amount thereof to the
Borrower's Loan Account at the Payment Office or into another account of the
Borrower specifically designated by the Borrower on the date and in the amount
set forth in the applicable Notice of Borrowing.
-45-
(10) Nonreceipt of Funds by Agent.
Unless the Agent shall have received notice from a Co-Lender prior to the date
on which such Co-Lender is to provide funds to the Agent for a Loan to be and by
such Co-Lender that such Co-Lender will not make available to the Agent such
funds, the Agent may assume that such Co-Lender has made such funds available to
the Agent on the date of such Loan in accordance with the provisions hereof
entitled "Notice and Manner of Borrowing", and the Agent in its sole discretion
may, but shall not be obligated to, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Co-Lender shall not have so made such funds available to the
Agent, such Co-Lender agrees to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at the customary rate set by the Agent for the correction
of errors among correspondent banks for three Business Days and thereafter at
the Alternate Base Rate. If such Co-Lender shall repay to the Agent such
corresponding amount forthwith, such amount so repaid shall constitute such
Co-Lender's Loan for purposes of this Agreement. If such Co-Lender does not pay
such corresponding amount forthwith upon Agent's demand therefor, the Agent
shall promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at the rate of interest applicable at the time to such
proposed Loan.
Unless the Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Co-Lenders hereunder that the Borrower will not make such payment in full, the
Agent may assume that the Borrower has made such payment in full to the Agent on
such date and the Agent in its sole discretion may, but shall not be obligated
to, in reliance upon such assumption, cause to be distributed to each Co-Lender
on such due date an amount equal to the amount then due to such Co-Lender. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Co-Lender shall repay to the Agent forthwith on demand such
amount distributed to such Co-Lender together with interest thereon, for each
day from the date such amount is distributed to such Co-Lender until the date
such Co-Lender repays such amount to the Agent, at the customary rate set by the
Agent for the correction of errors among correspondent banks for three Business
Days and thereafter at the Alternate Base Rate. All of the provisions contained
in this subsection (k) shall, however, be subject to the provisions above
dealing with any Restricted Co-Lender(s).
(11) Amendment, Termination, Waiver and
Action by the Agent. No Amendment, modification, termination, or waiver of any
provision of this Agreement or any of the Ancillary Agreements to which the
Borrower is a party, nor consent to any departure by the Borrower from any of
the Ancillary Agreements to which it is a party, shall in any event be effective
unless the same shall be in writing and signed by the Agent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that except to the limited
extent specifically and affirmatively required by the terms and provisions
hereof, the Agent is at liberty and without any applicable restriction, to act,
or to omit to act, to enforce or to refrain from enforcing, in accordance with
the terms and provisions of this Agreement, without any notice to and without
obtaining any consent or approval of any of the Co-Lenders hereunder. The Agent
need not take any action hereunder and no amendment, waiver or consent shall be
called for to be entered into by the Agent hereunder.
-46-
(12) Execution and Delivery of
Supplemental Documents and Action. Borrower agrees at the request of the Agent
made at any time and from time to time to: (a) execute and to cause to be
delivered to the Agent, on behalf of itself and each of the other Co-Lenders
hereunder such further documentation as the Agent or any of the Co-Lenders may
deem reasonably necessary or desirable in order to implement the terms and
provisions hereof; and (b) take such reasonable additional steps and actions as
the Agent requests for any of such purposes.
(13) Confidentiality. Each of the
Co-Lenders agrees to be bound in all respects by the terms and provisions of
this Agreement, including without limitation all confidentiality provisions
hereof and the Co-Lenders shall keep confidential all information which this
Agreement states is not to be disseminated and shall otherwise fully comply with
all confidentiality requirements of this Agreement.
(14) Fees and Entitlements. Each of the
Co-Lenders agree that they shall not be entitled to receive any portion of any
fees, charges or any other compensation which the Agent is or at any time may be
entitled to charge or receive under or in relation to this Agreement, or under
or in relation to any other agreement or arrangement that the Agent may now or
hereafter have with or concerning the Borrower, or any of its Subsidiaries or
Affiliates. As their exclusive entitlement as a Co-Lender and in any other
capacity under or in relation to this Agreement or otherwise, each of the
Co-Lenders other than the Agent shall each be entitled solely to the payment of
principal and interest due or to become due under the Revolving Loans,
corresponding to payments made in relation to Loans made to the Borrower
hereunder pursuant to the respective Commitments of each such Co-Lender.
(15) Counterparts. Any agreement or
consent of the Co-Lenders may be executed in any number of counterparts and by
different Co-Lenders and other parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
(16) Statements. All Loans to the
Borrower, and all other debits and credits provided for in this Agreement, shall
be evidenced by entries made by the Agent in its internal data control systems
showing the date, amount and reason for each such debit or credit. Until such
time as the Agent shall have rendered to the Borrower written statements of
account as provided herein, the balance in the Borrower's Loan Account, as set
forth in the Agent's most recent printout, shall be rebuttably presumptive
evidence of the amounts due and owing the Co-Lenders by the Borrower. Each month
the Agent shall render to the Borrower a statement setting forth the balance of
the Borrower's Loan Account, including principal, interest, expenses and fees.
Each such statement shall be subject to adjustment by the Agent, but shall,
absent manifest errors or omissions, be presumed correct and binding upon the
Borrower and shall constitute an account stated unless, within sixty (60) days
after receipt of any statement from the Agent, the Borrower shall deliver to the
Agent written objection thereto specifying the error or errors, if any,
contained in such statement.
-47-
(17) Defaults/Action by Agent. Should
an Event of Default exist or occur which may be declared hereunder at the
Agent's option, the Agent shall at the written election to that effect delivered
to the Agent by the Majority Lenders, declare such an Event of Default to have
occurred under this Agreement. For all purposes of this Agreement, however, the
Agent may assume that no Event of Default or Incipient Event of Default has
occurred and is continuing unless Agent has actual knowledge of the Event of
Default or Incipient Event of Default, has received notice from the Borrower or
a Co-Lender stating the nature of the Event of Default or Incipient Event of
Default and in the instance where such notice is from a Co-Lender, stating that
the Co-Lender considers the Event of Default or Incipient Event of Default to
have occurred and to be continuing.
Except where an affirmative obligation
on the part of the Agent to act is specifically set forth herein, requiring the
Agent to act, the Agent may, but shall not be required to exercise its
discretion to act or not to act. The Agent shall not be required to act or not
act if to do so would expose Agent to liability, would be inconsistent with the
Agent's practice in similar situations when acting solely for its own account,
or would be contrary to this Agreement or any of the Ancillary Agreements or to
applicable law.
26. Notices. Any notice or request hereunder
may be given to Borrower or Lender at the respective addresses set forth below
or as may hereafter be specified in a notice designated as a change of address
under this paragraph. Any notice or request hereunder shall be given by
registered or certified mail, return receipt requested, or by overnight mail or
by telecopy (confirmed by mail). Notices and requests shall be, in the case of
those by mail or overnight mail, deemed to have been given when deposited in the
mail or with the overnight mail carrier, and, in the case of a telecopy, when
confirmed.
Notices shall be provided as follows:
If to the Lender:
GMAC COMMERCIAL CREDIT LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
-48-
If to the Borrower: Greka Integrated, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman, CEO & Pres.
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Greka Integrated, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
27. Governing Law and Waiver of Jury Trial. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. LENDER SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED
PARTY UNDER APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL
CODE OF NEW YORK. BORROWER AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER
OBLIGATIONS SHALL BE LITIGATED IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR, AT LENDER'S OPTION, IN ANY OTHER COURTS
LOCATED IN NEW YORK STATE OR ELSEWHERE AS LENDER MAY SELECT AND THAT SUCH COURTS
ARE CONVENIENT FORUMS AND BORROWER SUBMITS TO THE PERSONAL JURISDICTION OF SUCH
COURTS. BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF
PROCESS UPON BORROWER MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO BORROWER AT BORROWER'S ADDRESS IN CALIFORNIA AND
NEW YORK APPEARING ON LENDER'S RECORDS, AND SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON RECEIPT VIA NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE THE
SECOND BUSINESS DAY FOLLOWING DEPOSIT WITH SUCH COURIER SERVICE. BOTH PARTIES
HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN
BORROWER AND LENDER, AND BORROWER WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR
PROCEEDING INSTITUTED BY LENDER WITH REGARD TO THIS AGREEMENT OR ANY OF THE
OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS)
WHICH IT MAY HAVE.
28. Limitation of Liability. Borrower acknowledges and
understands that in order to assure repayment of the Obligations hereunder
Lender may be required to exercise any and all of Lender's rights and remedies
hereunder and agrees that neither Lender nor any of Lender's agents shall be
liable for acts taken or omissions made in connection herewith or therewith
except for gross negligence or actual bad faith.
-49-
29. Entire Understanding. This Agreement and the Ancillary
Agreements contain the entire understanding between Borrower and Lender and
constitute the complete agreement between the parties with respect to the
subject matter hereof and thereof, and any promises, representations,
warranties, understandings, or guarantees not contained in this Agreement or the
Ancillary Agreements shall have no force and effect.
30. Modification. Neither this Agreement, the Ancillary
Agreements, nor any portion or provisions thereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the parties hereto and thereto.
31. Severability. Wherever possible each provision of this
Agreement or the Ancillary Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or the Ancillary Agreements shall be prohibited by or invalid under
applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions thereof.
32. Captions. All captions are and shall be without
substantive meaning or content of any kind whatsoever.
33. Counterparts. This Agreement may be executed in one or
more counterparts, each of which taken together shall constitute one and the
same instrument.
34. Construction. The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
GREKA INTEGRATED, INC.
ATTEST:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------- -----------------------------
SECRETARY ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, CEO & Pres.
SABA REALTY, INC.
ATTEST:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------- -----------------------------
SECRETARY ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, CEO & Pres.
-50-
SANTA ▇▇▇▇▇ REFINING COMPANY
ATTEST:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------- -----------------------------
SECRETARY ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, CEO & Pres.
ATTEST:
GMAC COMMERCIAL CREDIT LLC
/s/ illegible By:/s/▇▇▇▇▇ ▇▇▇▇▇▇▇▇, SVP
--------------------------- -----------------------------
SECRETARY Title:
-51-
SCHEDULES
Schedule 1(A)(1) - Santa ▇▇▇▇▇ Oil and Gas Properties (including specification
of Initial Santa ▇▇▇▇▇ Oil and Gas Properties and Secondary Santa ▇▇▇▇▇ Oil and
Gas Properties) - Attached
Schedule 1(A)(2) - Description of Pledged Shares
1. Certificate No. 2 for one hundred (100) shares of common stock of Saba
Realty, Inc.
2. Certificate No. 2 for one hundred (100) shares of common stock of Santa
▇▇▇▇▇ Refining Company.
Schedule 1(A)(3) - Description of Real Property - Attached
Schedule 1(A)(4) - Permitted Liens:
All encumbrances disclosed in Lender's UCC search of Borrowers and all
encumbrances disclosed in Lender's title policy.
All encumbrances listed on the title opinion dated November 30, 1999 issued with
respect to the Initial Santa ▇▇▇▇▇ Oil and Gas Properties, except the lien in
favor of Bank One Texas, N.A. and provided that the following liens are released
on or before March 31, 2000:
5. Oil and Gas Lien in favor of NATCO against Saba Petroleum in
the amount of $11, 596.12 affecting the ▇▇▇▇ Parcel recorded
August 20, 1998
6. Oil and Gas Lien in favor of R.M.R. against Saba Petroleum in
the amount of $166,228.60 recorded July 21, 1999
7. Oil and Gas lien in favor of Pool California Energy Services,
Inc. against Saba Petroleum, Inc. in the amount of $105,164.23
recorded May 20, 1999
8. State Tax Lien in the amount of $38, 688.00 recorded April 15,
1999
All purchase money security interest for the purchase of equipment within the
limitations for capital expenditures in this Agreement.
Liens for taxes not yet due and payable or those being contested in good faith
by appropriate proceedings diligently conducted so long as such proceedings do
not involve the risk of sale, forfeiture or loss of any of the Collateral or any
interest therein.
Materialmen's, mechanics, workmen's, carriers' or other similar liens relating
to the Collateral for amounts not yet due and payable or being contested in
good faith and by appropriate proceedings diligently conducted and so long as
such proceedings do not involve the risk of sale, forfeiture or loss of any of
the Collateral or any interest therein.
Liens not in excess of $250,000 in the aggregate which have been duly bonded
and released in a manner satisfactory to Lender.
Schedule 1(A)(5) - Vintage Oil and Gas Properties - Attached
Schedule 2(k) - Form of Request for Term Loan Advance - Attached
Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights - Attached
Schedule 12(l) - Inventory Locations
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Schedule 12(m) - Permitted Indebtedness
None, other than (I) indebtedness for purchase money security interests as set
forth above and (ii) indebtedness to Saba Petroleum Company and/or Greka Energy
Corporation relating to debt created to facilitate the purchase of the Vintage
Oil and Gas Properties and the Santa ▇▇▇▇▇ Oil and Gas Properties, which
indebtedness must be disclosed in advance to the Lender and must be subject to
a Subordination Agreement in form and substance satisfactory to Lender in all
respects.
Schedule 12(cc) - Property and Leases - Attached
